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FIRST DIVISION

JEROME CASTRO, G.R. No. 180832


Petitioner,

PEOPLE OF THE PHILIPPINES,


Respondent. Promulgated:

July 23, 2008

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RESOLUTION

CORONA, J.:

This petition for review on certiorari[1] emanated from the complaint for grave oral defamation[2]
filed by Albert P. Tan against petitioner Jerome Castro.

The facts follow.

On November 11, 2002, Reedley International School (RIS) dismissed Tans son, Justin Albert
(then a Grade 12 student), for violating the terms of his disciplinary probation.[3] Upon Tans
request, RIS reconsidered its decision but imposed non-appealable conditions such as excluding
Justin Albert from participating in the graduation ceremonies.

Aggrieved, Tan filed a complaint in the Department of Education (Dep-Ed) for violation of the
Manual of Regulation of Private Schools, Education Act of 1982 and Article 19 of the Civil
Code[4] against RIS. He alleged that the dismissal of his son was undertaken with malice, bad
faith and evident premeditation. After investigation, the Dep-Ed found that RIS code violation
point system allowed the summary imposition of unreasonable sanctions (which had no basis in
fact and in law). The system therefore violated due process. Hence, the Dep-Ed nullified it. [5]

Meanwhile, on November 20, 2002, the Dep-Ed ordered RIS to readmit Justin Albert without any
condition.[6] Thus, he was able to graduate from RIS and participate in the commencement
ceremonies held on March 30, 2003.

After the graduation ceremonies, Tan met Bernice C. Ching, a fellow parent at RIS. In the course
of their conversation, Tan intimated that he was contemplating a suit against the officers of RIS in
their personal capacities, including petitioner who was the assistant headmaster.

Ching telephoned petitioner sometime the first week of April and told him that Tan was planning
to sue the officers of RIS in their personal capacities. Before they hung up, petitioner told Ching:

Okay, you too, take care and be careful talking to [Tan], thats dangerous.
Ching then called Tan and informed him that petitioner said talking to him was dangerous.

Insulted, Tan filed a complaint for grave oral defamation in the Office of the City Prosecutor of
Mandaluyong City against petitioner on August 21, 2003.

On November 3, 2003, petitioner was charged with grave oral defamation in the Metropolitan
Trial Court (MeTC) of Mandaluyong City, Branch 60[7] under the following Information:

That on or about the 13th day of March, 2003 in the City of Mandaluyong, Philippines, a place
within the jurisdiction of this Honorable Court, the above-named [petitioner], with deliberate
intent of bringing ATTY. ALBERT P. TAN, into discredit, dishonor, disrepute and contempt, did
then and there, willfully, unlawfully and feloniously speak and utter the following words to Ms.
Bernice C. Ching:

OK, YOU TOO, YOU TAKE CARE AND BE CAREFUL TALKING TO [TAN], THATS DANGEROUS.

and other words of similar import of a serious and insulting nature.

CONTRARY TO LAW.

Petitioner pleaded not guilty during arraignment.

The prosecution essentially tried to establish that petitioner depicted Tan as a dangerous person.
Ching testified that petitioner warned her that talking to Tan was dangerous. Tan, on the other
hand, testified that petitioners statement shocked him as it portrayed him as someone capable of
committing undesirable acts. He added that petitioner probably took offense because of the
complaint he filed against RIS in the Dep-Ed.

For his defense, petitioner denied harboring ill-feelings against Tan despite the latters complaint
against RIS in the Dep-Ed. Although he admitted conversing with Ching (whom he considered as
a close acquaintance) on the telephone a few days after RIS 2003 commencement exercises,
petitioner asserted that he never said or insinuated that Tan or talking to Tan was dangerous. On
cross-examination, however, he did not categorically deny the veracity of Chings statement.

The MeTC found that Chings statements in her affidavit and in open court were consistent and
that she did not have any motive to fabricate a false statement. Petitioner, on the other hand,
harbored personal resentment, aversion and ill-will against Tan since the Dep-Ed compelled RIS
to readmit his son. Thus, the MeTC was convinced that petitioner told Ching talking to Tan was
dangerous and that he uttered the statement with the intention to insult Tan and tarnish his
social and professional reputation.

In a decision dated December 27, 2005, the MeTC found petitioner guilty beyond reasonable
doubt of grave oral defamation:[8]
WHEREFORE, judgment is hereby rendered finding accused, Jerome Castro GUILTY beyond
reasonable doubt of the crime of Grave Oral Defamation, sentencing him therefore, in
accordance to Article 358(1) of the Revised Penal Code and applying the Indeterminate Sentence
Law to suffer the penalty of imprisonment of 1 month and 1 day of arresto mayor as minimum to
4 months and 1 day of arresto mayor as maximum.

On appeal, the Regional Trial Court (RTC) affirmed the factual findings of the MeTC. However, in
view of the animosity between the parties, it found petitioner guilty only of slight oral
defamation. But because Tan filed his complaint in the Office of the City Prosecutor of
Mandaluyong City only on August 21, 2003 (or almost five months from discovery), the RTC ruled
that prescription had already set in; it therefore acquitted petitioner on that ground. [9]

On April 19, 2007, the Office of the Solicitor General (OSG) filed a petition for certiorari in the
Court of Appeals (CA) assailing the decision of the RTC.[10] It contended that the RTC acted with
grave abuse of discretion when it downgraded petitioners offense to slight oral defamation. The
RTC allegedly misappreciated the antecedents which provoked petitioner to utter the allegedly
defamatory statement against Tan.

The CA found that the RTC committed grave abuse of discretion when it misapprehended the
totality of the circumstances and found petitioner guilty only of slight oral defamation. Thus, the
CA reinstated the MeTC decision.[11]

Petitioner moved for reconsideration but it was denied.[12] Hence, this recourse.

Petitioner basically contends that the CA erred in taking cognizance of the petition for certiorari
inasmuch as the OSG raised errors of judgment (i.e., that the RTC misappreciated the evidence
presented by the parties) but failed to prove that the RTC committed grave abuse of discretion.
Thus, double jeopardy attached when the RTC acquitted him.

We grant the petition.

No person shall be twice put in jeopardy of punishment for the same offense.[13] This
constitutional mandate is echoed in Section 7 of Rule 117 of the Rules of Court which provides:

Section 7. Former conviction or acquittal; double jeopardy. When an accused has been convicted
or acquitted or the case against him dismissed or otherwise terminated without his express
consent by a court of competent jurisdiction, upon a valid complaint or in information or other
formal charge sufficient in form and substance to sustain a conviction and after the accused had
pleaded to the charge, the conviction or acquittal of the accused or the dismissal of the case shall
be a bar to another prosecution for the offense charged or for any attempt to commit the same
or frustration thereof, or for any offense which necessarily includes or is necessarily included in
the offense charged in the former complaint or information.

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Under this provision, double jeopardy occurs upon (1) a valid indictment (2) before a competent
court (3) after arraignment (4) when a valid plea has been entered and (5) when the accused was
acquitted or convicted or the case was dismissed or otherwise terminated without the express
consent of the accused.[14] Thus, an acquittal, whether ordered by the trial or appellate court, is
final and unappealable on the ground of double jeopardy.[15]

The only exception is when the trial court acted with grave abuse of discretion or, as we held in
Galman v. Sandiganbayan,[16] when there was mistrial. In such instances, the OSG can assail the
said judgment in a petition for certiorari establishing that the State was deprived of a fair
opportunity to prosecute and prove its case.[17]

The rationale behind this exception is that a judgment rendered by the trial court with grave
abuse of discretion was issued without jurisdiction. It is, for this reason, void. Consequently,
there is no double jeopardy.

In this case, the OSG merely assailed the RTCs finding on the nature of petitioners statement,
that is, whether it constituted grave or slight oral defamation. The OSG premised its allegation of
grave abuse of discretion on the RTCs erroneous evaluation and assessment of the evidence
presented by the parties.

What the OSG therefore questioned were errors of judgment (or those involving misappreciation
of evidence or errors of law). However, a court, in a petition for certiorari, cannot review the
public respondents evaluation of the evidence and factual findings.[18] Errors of judgment
cannot be raised in a Rule 65 petition as a writ of certiorari can only correct errors of jurisdiction
(or those involving the commission of grave abuse of discretion).[19]

Because the OSG did not raise errors of jurisdiction, the CA erred in taking cognizance of its
petition and, worse, in reviewing the factual findings of the RTC.[20] We therefore reinstate the
RTC decision so as not to offend the constitutional prohibition against double jeopardy.

At most, petitioner could have been liable for damages under Article 26 of the Civil Code[21]:

Article 26. Every person shall respect the dignity, personality, privacy and peace of mind of his
neighbors and other persons. The following and similar acts, though they may not constitute a
criminal offense, shall produce a cause of action for damages, prevention and other relief.

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(3) Intriguing to cause another to be alienated from his friends;

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Petitioner is reminded that, as an educator, he is supposed to be a role model for the youth. As
such, he should always act with justice, give everyone his due and observe honesty and good
faith.[22]
WHEREFORE, the petition is hereby GRANTED. The August 29, 2007 decision and December 5,
2007 resolution of the Court of Appeals in CA-G.R. SP No. 98649 are REVERSED and SET ASIDE.
The November 20, 2006 decision of the Regional Trial Court of Mandaluyong City, Branch 212 is
REINSTATED. Petitioner Jerome Castro is ACQUITTED of slight oral defamation as defined and
penalized in Article 358 of the Revised Penal Code.

No pronouncement as to costs.

SO ORDERED.

RENATO C. CORONA

G.R. No. L-54598 April 15, 1988

JOSE B. LEDESMA, petitioner,


vs.
HON. COURT OF APPEALS, Spouses PACIFICO DELMO and SANCHA DELMO (as private
respondents), respondents.

The Solicitor General for petitioner.

Luzel D. Demasu-ay for respondent.

GUTIERREZ, JR., J.:

This petition seeks to reverse the decision of the respondent Court of Appeals which afirmed the
decision of the Court of First Instance of Iloilo, adjudging the petitioner, who was then the
President of the West Visayas College liable for damages under Article 27 of the Civil Code of
the Philippines for failure to graduate a student with honors.

The facts are not disputed.

An organization named Student Leadership Club was formed by some students of the West
Visayas College. They elected the late Violets Delmo as the treasurer. In that capacity, Delmo
extended loans from the funds of the club to some of the students of the school. "the petitioner
claims that the said act of extending loans was against school rules and regulations. Thus, the
petitioner, as President of the School, sent a letter to Delmo informing her that she was being
dropped from the membership of the club and that she would not be a candidate for any award
or citation from the school.

Delmo asked for a reconsideration of the decision but the petitioner denied it. Delmo, thus,
appealed to the Office of the Director of the Bureau of Public Schools.

The Director after due investigation, rendered a decison on April 13, 1966 which provided:

Records of the preliminary investigation conducted by one of the legal officers of this Office
disclosed the following: That Violeta Delmo was the treasurer of the Student Leadership Club, an
exclusive student organization; that pursuant to Article IX of the of the Constitution and By-Laws
of the club, it passed Resolution No. 2, authorizing the treasurer to disburse funds of the Club to
student for financial aid and other humanitarian purposes; that in compliance with said resolution
and as treasurer of the Club, Violeta Delmo extended loans to some officers and members of the
Club upon proper application duly approved by the majority of the members of the Executive
Board; and that upon receiving the report from Mr. Jesse Dagoon, adviser of the funds of the
Club, that Office conducted an investigation on the matter and having been convinced of the
guilt of Violets Delmo and the other officers and members of the Club, that Office rendered the
order or decision in question. In justifying that Office's order or decision, it is contended that
approval by that Office of the Constitution and By-Laws of the Club is necessary for its effectivity
and validity and since it was never submitted to that Office, the Club had no valid constitution
and By-Laws and that as a consequence, Resolution No. 2 which was passed based on the
Constitution and By-Laws- is without any force and effect and the treasurer, Violeta Delmo, who
extended loans to some officers and members of the Club pursuant thereto are illegal (sic),
hence, she and the other students involved are deemed guilty of misappropriating the funds of
the Club. On the other hand, Raclito Castaneda, Nestor Golez and Violeta Delmo, President,
Secretary and Treasurer of the Club, respectively, testified that the Club had adopted its
Constitution and By-Laws in a meeting held last October 3, 1965, and that pursuant to Article I of
said Constitution and By-Laws, the majority of the members of the Executive Board passed
Resolution No. 2, which resolution became the basis for the extension on of loans to some
officers and members of the Club, that the Club honestly believed that its Constitution and By-
Laws has been approved by the superintendent because the adviser of the Club, Mr. Jesse
Dagoon, assured the President of the Club that he will cause the approval of the Constitution
and By-Laws by the Superintendent; the officers of the Club have been inducted to office on
October 9,1965 by the Superintendent and that the Club had been likewise allowed to cosponsor
the Education Week Celebration.

After a careful study of the records, this Office sustains the action taken by the Superintendent in
penalizing the adviser of the Club as well as the officers and members thereof by dropping them
from membership therein. However, this Office is convinced that Violets M. Delmo had acted in
good faith, in her capacity as Club Treasurer, in extending loans to the officers and members of
the Student partnership Club. Resolution No. 2 authorizing the Club treasurer to discharge finds
to students in need of financial assistance and other humanitarian purposes had been approved
by the Club adviser, Mr. Jesse Dagoon, with the notation that approval was given in his capacity
as adviser of the Club and extension of the Superintendent's personality. Aside from misleading
the officers and members of the Club, Mr. Dagoon, had unsatisfactorily explained why he failed
to give the Constitution and By-Laws of the Club to the Superintendent for approval despite his
assurance to the Club president that he would do so. With this finding of negligence on the part
of the Club adviser, not to mention laxity in the performance of his duties as such, this Office
considers as too severe and unwarranted that portion of the questioned order stating that
Violeta Delmo "shall not be a candidate for any award or citation from this school or any
organization in this school." Violeta Delmo, it is noted, has been a consistent full scholar of the
school and she alone has maintained her scholarship. The decision in question would, therefore,
set at naught all her sacrifice and frustrate her dreams of graduating with honors in this year's
commencement exercises.

In view of all the foregoing, this Office believes and so holds and hereby directs that appellant
Violeta. M. Delmo, and for that matter all other Club members or officers involved in this case,
be not deprived of any award, citation or honor from the school, if they are otherwise entitled
thereto. (Rollo, pp. 28-30)

On April 27, 1966, the petitioner received by mail the decision of the Director and all the records
of the case. On the same day, petitioner received a telegram stating the following:

"AIRMAIL RECORDS DELMO CASE MISSENT THAT OFFICE"

The Director asked for the return only of the records but the petitioner allegedly mistook the
telegram as ordering him to also send the decision back. On the same day, he returned by mail
all the records plus the decision of the Director to the Bureau of Public Schools.

The next day, the petitioner received another telegram from the Director order him to furnish
Delmo with a copy of the decision. The petitioner, in turn, sent a night letter to the Director
informing the latter that he had sent the decision back and that he had not retained a copy
thereof..

On May 3, 1966, the day of the graduation, the petitioner received another telegram from the
Director ordering him not to deprive Delmo of any honors due her. As it was impossible by this
time to include Delmo's name in the program as one of the honor students, the petitioner let her
graduate as a plain student instead of being awarded the Latin honor of Magna Cum Laude.

To delay the matter further, the petitioner on May 5, 1966, wrote the Director for a
reconsideration of the latters" decision because he believed that Delmo should not be allowed to
graduate with honors. The Director denied the petitioner's request.

On July 12, 1966, the petitioner finally instructed the Registrar of the school to enter into the
scholastic records of Delmo the honor, "Magna Cum Laude."

On July 30, 1966, Delmo, then a minor, was joined by her parents in flag action for damages
against the petitioner. During the pendency of the action, however, Delmo passed away, and
thus, an Amended and Supplemental Complaint was filed by her parents as her sole and only
heirs.

The trial court after hearing rendered judgment against the petitioner and in favor of the spouses
Delmo. The court said:

Let us go to specific badges of the defendants (now petitioners) bad faith. Per investigation of
Violeta Delmo's appeal to Director Vitaliano Bernardino of the Bureau of Public Schools (Exhibit L
it was the defendant who inducted the officers of the Student Leadership Club on October 9,
1965. In fact the Club was allowed to cosponsor the Education Week Celebration. (Exh. "L"). If
the defendant he not approve of the constitution and by-laws of the Club, why did he induct the
officers into office and allow the Club to sponsor the Education Week Celebration"? It was
through his own act that the students were misled to do as they did. Coupled with the
defendants tacit recognition of the Club was the assurance of Mr. Jemm Dagoon, Club Adviser,
who made the students believe that he was acting as an extension of Mr. Ledesma's personality.
(Exhibit "L").

Another badge of the defendan'ts want of good faith is the fact that, although, he kaew as early
as April 27,1966 that per on of r Bernardino, Exhibit "L," he was directed to give honors to Miss
Delmo, he kept Id information to . He told the Court that he knew that the letter of Director
Bernardino directed him not to deprive Miss Delmo the honors due her, but she (sic) says that he
has not finished reading the letter-decision, Exhibit "L," of Director Bernardino 0, him to give
honors to Miss Delmo. (Tsn, Feb. 5, 1974, testimony of Mr. Ledesma, pp. .33-35). It could not be
true that he has not finished reading the letter-decision, Exh. "L," because said letter consisted
of only three pages, and the portion which directed that Miss Delmo "be not deprived of any
award, citation or honor from the school, if otherwise entitled thereto is found at the last
paragraph of the same. How did he know the last paragraph if he did not read the letter.

Defendants actuations regarding Miss Delmo's cam had been one of bias and prejudice. When
his action would favor him, he was deliberate and aspect to the utter prejudice and detriment of
Miss Delmo. Thus, although, as early as April 27, 1966, he knew of the exoneration of Miss Delino
by Director Bernardino, he withheld the information from Miss Delmo. This is eloquently
dramatized by Exh. "11" and Exh. "13" On April 29,1966, Director Bernardino cabled him to
furnish Violeta Delmo copy of the Decision, Exh. "L," but instead of informing Miss Delmo about
the decision, since he said he mailed back the decision on April 28,1966, he sent a night letter on
April 29,1966, to Director Bernardino, informing the latter that he had returned the decision (Exh.
"l3"), together with the record. Why a night letter when the matter was of utmost urgency to the
parties in the case, because graduation day was only four days ahead? An examination of the
telegrams sent by the defendant shows that he had been sending ordinary telegram and not
night letters. (Exh. "5", Exhibit "7"). At least, if the defendant could not furnish a copy of the
decision, (Exh. "L"), to Miss Delmo, he should have told her about it or that Miss Delmo's honors
and citation in the commencement be announced or indicated. But Mr. Ledesma is one who
cannot admit a mistake. Very ungentlemanly this is home out by his own testimony despite his
knowledge that his decision to deprive Miss Delmo of honors due to her was overturned by
Director Bernardino, he on his wrong belief. To quote the defendant,1 believed that she did not
deserve those honors(Tsn Feb. 5, 1974, p. 43,Empasized supplied). Despite the telegram of
Director Bernardino which the defendant received hours before the commencement executory
on May 3-4,1966, he did not obey Director Bernardino because he said in his testimony that he
would be embarrassment . Tan Feb 5,1974, P. 46). Evidently, he knew only his embarrassment
and not that of r Bernardino whose order was being flagrantly and wantonly disregarded by bim
And certainly, not the least of Miss Delmo's embarrassment. His acts speak eloquently of ho bad
faith and unjust of mindwarped by his delicate sensitivity for having been challenged by Miss
Delmo, a mere student.

xxx xxx xxx


Finally the defendant's behaviour relative to Miss s case smacks of contemptuous arrogance,
oppression and abuse of power. Come to think of it. He refused to obey the directive of Be o
and instead, chose to feign ignorance of it." (Reward on Appeal, p. 72-76).

The trial court awarded P20,000.00 to the estate of Violeta Delmo and P10,000.00 to her parents
for moral damages; P5,000.00 for nominal damages to Violeta's estate; exemplary damages of
P10,000.00 and P2,000.00 attorney's fees.

On appeal, the Court of Appeals affirmed the decision. Hence, this petition.

The issues raised in this petition can be reduced to the sole question of whether or not the
respondent Court of Appeals erred in affirming the trial court's finding that petitioner is liable for
damages under Article 27 of the New Civil Code.

We find no reason why the findings of the trial and appellate courts should be reversed. It cannot
be disputed that Violeta Delmo went through a painful ordeal which was brought about by the
petitioner's neglect of duty and callousness. Thus, moral damages are but proper. As we have
affirmed in the case of (Prudenciado v. Alliance Transport System, Inc., 148 SCRA 440, 448):

There is no argument that moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and
similar injury. Though incapable of pecuniary computation, moral damages may be recovered if
they are the proximate result of defendant's wrongly act or omission." (People v. Baylon, 129
SCRA 62 (1984).

The Solicitor-General tries to cover-up the petitioner's deliberate omission to inform Miss Delmo
by stating that it was not the duty of the petitioner to furnish her a copy of the Director's
decision. Granting this to be true, it was nevertheless the petitioner's duty to enforce the said
decision. He could have done so considering that he received the decision on April 27, 1966 and
even though he sent it back with the records of the case, he undoubtedly read the whole of it
which consisted of only three pages. Moreover, the petitioner should have had the decency to
meet with Mr. Delmo, the girl's father, and inform the latter, at the very least of the decision.
This, the petitioner likewise failed to do, and not without the attendant bad faith which the
appellate court correctly pointed out in its decision, to wit:

Third, assuming that defendant could not furnish Miss Delmo of a copy of the decision, he could
have used his discretion and plain common sense by informing her about it or he could have
directed the inclusion of Miss Delmo's honor in the printed commencement program or
announced it during the commencement exercises.

Fourth, defendant despite receipt of the telegram of Director Benardino hours before the
commencement exercises on May 3-4, 1966, disobeyed his superior by refusing to give the
honors due Miss Delmo with a lame excuse that he would be embarrassed if he did so, to the
prejudice of and in complete disregard of Miss Delmo's rights.

Fifth, defendant did not even extend the courtesy of meeting Mr. Pacifico Delmo, father of Miss
Delmo, who tried several times to see defendant in his office thus Mr. Delmo suffered extreme
disappointment and humiliation.

xxx xxx xxx

Defendant, being a public officer should have acted with circumspection and due regard to the
rights of Miss Delmo. Inasmuch as he exceeded the scope of his authority by defiantly disobeying
the lawful directive of his superior, Director Bernardino, defendant is liable for damages in his
personal capacity. . . . (Rollo, pp- 57-58)

Based on the undisputed facts, exemplary damages are also in order. In the same case of
Prudenciado v. Alliance Transport System, Inc., supra., at p. 450, we ruled:

The rationale behind exemplary or corrective damages is, as the name implies, to provide an
example or correction for the public good (Lopez, et al. v. Pan American World Airways, 16 SCRA
431).

However, we do not deem it appropriate to award the spouses Delmo damages in the amount of
P10,000.00 in their individual capacity, separately from and in addition to what they are already
entitled to as sole heirs of the deceased Violeta Delmo. Thus, the decision is modified insofar as
moral damages are awarded to the spouses in their own behalf.

WHEREFORE, the petition is DISMISSED for lack of merit. The decision of the Court of Appeals is
AFFIRMED with the slight modification as stated in the preceding paragraph. This decision is
immediately executory.

SO ORDERED.

Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.

A.C. No. 8261 March 11, 2015

JESSIE T. CAMPUGAN and ROBERT C. TORRES, Complainants,


vs.
ATTY. FEDERICO S. TOLENTINO, JR., ATTY. RENATO G. CUNANAN, ATTY. DANIEL F.
VICTORIO, JR., and ATTY. ELBERT T. QUILALA, Respondents.

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A.C. No. 8725

JESSIE T. CAMPUGAN and ROBERT C. TORRES, Complainants,


vs.
ATTY. CONSTANTE P. CALUYA, JR. and ATTY. ELBERT T. QUILALA, Respondents.

DECISION
BERSAMIN, J.:

In this consolidated administrative case, complainants Jessie T. Campugan and Robert C. Torres
seek the disbarment of respondents Atty. Federico S. Tolentino, Jr., Atty. Daniel F. Victorio, Jr.,
Atty. Renato G. Cunanan, Atty. Elbert T. Quilala and Atty. Constante P. Caluya, Jr. for allegedly
falsifying a court order that became the basis for the cancellation of their annotation of the
notice ofadverse claim and the notice of lis pendens in the Registry of Deeds in Quezon City.

Antecedents

Atty. Victorio, Jr. had replaced Atty. Edgardo Abad as counsel of the complainants in a civil
action they brought to seek the annulment of Transfer Certificate of Title (TCT) No. N-290546 of
the Registry of Deeds of Quezon City in the first week of January 2007 in the Regional Trial Court
(RTC) in Quezon City (Civil Case No. Q-07-59598). They impleaded as defendants Ramon and
Josefina Ricafort, Juliet Vargas and the Register of Deeds of Quezon City. They caused to be
annotated on TCT No. N-290546 their affidavit of adverse claim, as well as the notice of lis
pendens.1 Atty. Tolentino, Jr. was the counsel of defendant Ramon and Josefina Ricafort.

In their sworn complaint for disbarment dated April 23, 2009 (later docketed as A.C. No. 8261),2
the complainants narrated that as the surviving children of the late Spouses Antonio and
Nemesia Torres, they inherited upon the deaths of their parents a residential lot located at No.
251 Boni Serrano Street, Murphy, Cubao, Quezon City registered under Transfer Certificate of
Title (TCT) No. RT-64333(35652) of the Register of Deeds of Quezon City;3 that on August 24,
2006, they discovered that TCT No. RT-64333(35652) had been unlawfully cancelled and replaced
by TCT No. N-290546 of the Register of Deeds of Quezon City under the names of Ramon and
Josefina Ricafort;4 and that, accordingly, they immediately caused the annotation of their
affidavit of adverse claim on TCT No. N-290546.

It appears that the parties entered into an amicable settlement during the pendency of Civil Case
No. Q-07-59598 in order to end their dispute,5 whereby the complainants agreed to sell the
property and the proceeds thereof would be equally divided between the parties, and the
complaint and counterclaim would be withdrawn respectively by the complainants (as the
plaintiffs) and the defendants. Pursuant to the terms of the amicable settlement, Atty. Victorio,
Jr. filed a Motion to Withdraw Complaint dated February 26, 2008,6 which the RTC granted in its
order dated May 16, 2008 upon noting the defendants’ lack of objection thereto and the
defendants’ willingness to similarly withdraw their counterclaim.7

The complainants alleged that from the time of the issuance by the RTC of the order dated May
16, 2008, they could no longer locate or contact Atty. Victorio, Jr. despite making several phone
calls and visits to his office; that they found out upon verification at the Register of Deeds of
Quezon City that new annotations were made on TCT No. N-290546, specifically: (1) the
annotation of the letter-request appearing to be filed by Atty. Tolentino, Jr.8 seeking the
cancellation of the affidavit of adverse claim and the notice of lis pendens annotated on TCT No.
N-290546; and (2) the annotation of the decision dated May 16, 2008 rendered in Civil Case No.
Q-07-59598 by the RTC, Branch 95, in Quezon City, granting the complainants’ Motion to
Withdraw Complaint;9 and that a copy of the letter request dated June 30, 2008 addressed to
Atty. Quilala, Registrar of Deeds of Quezon City, disclosed that it was defendant Ramon Ricafort
who had signed the letter.

Feeling aggrieved by their discovery, the complainants filed an appeal en consulta with the Land
Registration Authority (LRA), docketed as Consulta No. 4707, assailing the unlawful cancellation
of their notice of adverse claim and their notice of lis pendens under primary entries PE-2742 and
PE-3828-9, respectively. The LRA set Consulta No. 4707 for hearing on March 30, 2009, and
directed the parties to submit their respective memoranda and/or supporting documents on or
beforesuch scheduled hearing.10 However, the records do not disclose whether Consulta No.
4707 was already resolved, or remained pending at the LRA.

Unable to receive any response or assistance from Atty. Victorio, Jr. despite their having paid
him for his professional services, the complainants felt that said counsel had abandoned their
case. They submitted that the cancellation of their notice of adverse claim and their notice of lis
pendens without a court order specifically allowing such cancellation resulted from the
connivance and conspiracy between Atty. Victorio, Jr. and Atty. Tolentino, Jr., and from the
taking advantage of their positions as officials in the Registry of Deeds by respondents Atty.
Quilala, the Chief Registrar, and Atty. Cunanan, the acting Registrar and signatory of the new
annotations. Thus, they claimed to be thereby prejudiced.

On July 6, 2009, the Court required the respondents to comment on the verified complaint.11
Atty. Victorio, Jr. asserted in his Comment dated August 17, 200912 that complainant Robert
Torres had been actively involved in the proceedings in Civil Case No. Q-07-59598, which
included the mediation process; that the complainants, after having aggressively participated in
the drafting of the amicable settlement, could not now claim that they had been deceived into
entering the agreement in the same way that they could not feign ignorance of the conditions
contained therein; that he did not commit any abandonment as alleged, but had performed in
good faith his duties as the counsel for the complainants in Civil Case No. Q-07-59598; that he
should not be held responsible for their representation in other proceedings, such as that before
the LRA, which required a separate engagement; and that the only payment he had received
from the complainants were those for his appearance fees of ₱1,000.00 for every hearing in the
RTC.

In his Comment dated August 24, 2009,13 Atty. Tolentino, Jr. refuted the charge of conspiracy,
stressing that he was not acquainted with the other respondents, except Atty. Victorio, Jr. whom
he had met during the hearings in Civil Case No. Q-07-59598; that although he had notarized the
letter request dated June 30, 2008 of Ramon Ricafort to the Register of Deeds, he had no
knowledge about how said letter-request had been disposed of by the Register of Deeds; and
that the present complaint was the second disbarment case filed by the complainants against him
with no other motive except to harass and intimidate him.

Atty. Quilala stated in his Comment dated September 1, 200914 that it was Atty. Caluya, Jr.,
another Deputy Register of Deeds, who was the actual signing authority of the annotations that
resulted in the cancellation of the affidavit of adverse claim and the notice of lis pendens on TCT
No. N-290546; that the cancellation of the annotations was undertaken in the regular course of
official duty and in the exercise of the ministerial duty of the Register of Deeds; that no
irregularity occurred or was performed in the cancellation of the annotations; and that the
Register of Deeds was impleaded in Civil Case No. Q-07-59598 only as a nominal party, thereby
discounting any involvement in the proceedings in the case.

Atty. Cunanan did not file any comment.15

As the result of Atty. Quilala’s allegation in his Comment in A.C. No. 8261 that it had been Atty.
Caluya, Jr.’s signature that appeared below the cancelled entries, the complainants filed another
sworn disbarment complaint dated August 26, 2010 alleging that Atty. Caluya, Jr. had forged the
signature of Atty. Cunanan.16 This disbarment complaint was docketed as A.C. No. 8725, and
was later on consolidated with A.C. No. 826117 because the complaints involved the same
parties and rested on similar allegations against the respondents.

Atty. Quilala filed his Comment in A.C. No. 8725 to belie the allegation of forgery and to
reiterate the arguments he had made in A.C. No. 8261.18 On his part, Atty. Caluya, Jr.
manifested that he adopted Atty. Quilala’s Comment.19

Ruling

We dismiss the complaints for disbarment for being bereft of merit.

Well entrenched in this jurisdiction is the rule that a lawyer may be disciplined for misconduct
committed either in his professional or private capacity. The test is whether his conduct shows
him to be wanting in moral character, honesty, probity, and good demeanor, or whether his
conduct renders him unworthy to continue as an officer of the Court.20 Verily, Canon 7 of the
Code of Professional Responsibility mandates all lawyers to uphold at all times the dignity and
integrity of the Legal Profession. Lawyers are similarly required under Rule 1.01, Canon 1 of the
same Code not to engage in any unlawful, dishonest and immoral or deceitful conduct. Failure to
observe these tenets of the Code of Professional Responsibility exposes the lawyer to
disciplinary sanctions as provided in Section 27, Rule 138 of the Rules of Court, as amended, viz.:

Section 27. Disbarment or suspension of attorneys by Supreme Court, grounds therefor. — A


member of the bar may be disbarred or suspended from his office as attorney by the Supreme
Court for any deceit, malpractice, or other gross misconduct in such office, grossly immoral
conduct, or by reason of his conviction of a crime involving moral turpitude, or for any violation
of the oath which he is required to take before the admission to practice, or for a wilful
disobedience appearing as an attorney for a party to a case without authority so to do. The
practice of soliciting cases at law for the purpose of gain, either personally or through paid
agents or brokers, constitutes malpractice.

The complainants’ allegations of the respondents’ acts and omissions are insufficient to establish
any censurable conduct against them.

Section 10 of Presidential Decree No. 1529 (Property Registration Decree) enumerates the
general duties of the Register of Deeds, as follows:

Section 10. General functions of Registers of Deeds. – x x x

It shall be the duty of the Register of Deeds to immediately register an instrument presented for
registration dealing with real or personal property which complies with all the requisites for
registration. He shall see to it that said instrument bears the proper documentary science stamps
and that the same are properly canceled. If the instrument is not registrable, he shall forthwith
deny registration thereof and inform the present or of such denial in writing, stating the ground
or reason therefor, and advising him of his right to appeal by consulta in accordance with Section
117 of this Decree. (Emphasis supplied)

The aforementioned duty of the Register of Deeds is ministerial in nature.21 A purely ministerial
act or duty is one that an officer or tribunal performs in a given state of facts, in a prescribed
manner, in obedience to the mandate of a legal authority, without regard to or the exercise of his
own judgment upon the propriety or impropriety of the act done. If the law imposes a duty upon
a public officer and gives him the right to decide how or when the duty shall be performed, such
duty is discretionary, not ministerial. The duty is ministerial only when its discharge requires
neither the exercise of official discretion nor the exercise of judgment.22

In Gabriel v. Register of Deeds of Rizal,23 the Court underscores that registration is a merely
ministerial act of the Register of Deeds, explaining:

x x x [W]hether the document is invalid, frivolous or intended to harass, is not the duty of a
Register of Deeds to decide, but a court of competent jurisdiction, and that it is his concern to
see whether the documents sought to be registered conform with the formal and legal
requirements for such documents.

In view of the foregoing, we find no abuse of authority or irregularity committed by Atty. Quilala,
Atty. Cunanan, and Atty. Caluya, Jr. with respect to the cancellation of the notice of adverse
claim and the notice of lis pendens annotated on TCT No. N-290546. Whether or not the RTC
order dated May 16, 2008 or the letter-request dated June 30,2008 had been falsified, fraudulent
or invalid was not for them to determine inasmuch as their duty to examine documents
presented for registration was limited only to what appears on the face of the documents. If,
upon their evaluation of the letter-request and the RTC order, they found the same to be
sufficient in law and to be in conformity with existing requirements, it became obligatory for
them to perform their ministerial duty without unnecessary delay.24

Should they be aggrieved by said respondents’ performance of duty, the complainants were not
bereft of any remedy because they could challenge the performance of duty by bringing the
matter by way of consulta with the LRA, as provided by Section 11725 of Presidential Decree No.
1529. But, as enunciated in Gabriel v. Register of Deeds of Rizal,26 it was ultimately within the
province of a court of competent jurisdiction to resolve issues concerning the validity or invalidity
of a document registered by the Register of Deeds.

The complainants charge Atty. Victorio, Jr. and Atty. Tolentino, Jr. with having conspired with
each other to guarantee that the parties in Civil Case No. Q-59598 would enter into the amicable
settlement, and then to cause the cancellation of the affidavit of adverse claim and notice of lis
pendens annotated on TCT No. N-290546. The complainants further fault Atty. Victorio, Jr. with
having abandoned their cause since the issuance of the RTC of its order dated May 16, 2008. The
complainants’ charges are devoid of substance.
Although it is not necessary to prove a formal agreement in order to establish conspiracy
because conspiracy may be inferred from the circumstances attending the commission of an act,
it is nonetheless essential that conspiracy be established by clear and convincing evidence.27 The
complainants failed in this regard. Outside of their bare assertions that Atty. Victorio, Jr. and
Atty. Tolentino, Jr. had conspired with each other in order to cause the dismissal of the
complaint and then discharge of the annotations, they presented no evidence to support their
allegation of conspiracy. On the contrary, the records indicated their own active participation in
arriving at the amicable settlement with the defendants in Civil Case No. Q-07-59598. Hence,
they could not now turn their backs on the amicable settlement that they had themselves
entered into.

Even assuming that Atty. Victorio, Jr. and Atty. Tolentino, Jr. initiated and participated in the
settlement of the case, there was nothing wrong in their doing so. It was actually their obligation
as lawyers to do so, pursuant to Rule 1.04, Canon 1 of the Code of Professional Responsibility,
viz.:

RULE 1.04 – A lawyer shall encourage his clients to avoid, end or settle a controversy if it will
admit of a fair settlement.1âwphi1

In fine, the presumption of the validity of the amicable settlement of the complainants and the
defendants in Civil Case No. Q-07-59598 subsisted.28

Anent the complainants’ charge of abandonment against Atty. Victorio, Jr., Rule 18.03 and Rule
18.04, Canon 18 of the Code of Professional Responsibility are applicable, to wit:

CANON 18 – A lawyer shall serve his client with competence and diligence.

Rule 18.03 – A lawyer shall not neglecta legal matter entrusted to him, and his negligence in
connection therewith shall render him liable.

Rule 18.04 – A lawyer shall keep the client informed of the status of his case and shall respond
within a reasonable time to the client’s request for information.

There is no issue that the complainants engaged the services of Atty. Victorio, Jr. as their counsel
in Civil Case No. Q-07-59598. Atty. Victorio, Jr. served as such counsel. With Atty. Victorio, Jr.
assistance, the complainants obtained a fair settlement consisting in receiving half of the
proceeds of the sale of the property in litis, without any portion of the proceeds accruing to
counsel as his legal fees. The complainants did not competently and persuasively show any
unfaithfulness on the part of Atty. Victorio, Jr. as far as their interest in the litigation was
concerned. Hence, Atty. Victorio, Jr. was not liable for abandonment.

Atty. Victorio, Jr. could not be faulted for the perceived inattention to any other matters
subsequent to the termination of Civil Case No. Q-07-59598. Unless otherwise expressly
stipulated between them at any time during the engagement, the complainants had no right to
assume that Atty. Victorio, Jr.’s legal representation was indefinite as to extend to his
representation of them in the LRA. The Law Profession did not burden its members with the
responsibility of indefinite service to the clients; hence, the rendition of professional services
depends on the agreement between the attorney and the client. Atty. Victorio, Jr.’s alleged
failure to respond to the complainants’ calls or visits, or to provide them with his whereabouts to
enable them to have access to him despite the termination of his engagement in Civil Case No.
Q-07-59598 did not equate to abandonment without the credible showing that he continued to
come under the professional obligation towards them after the termination of Civil Case No. Q-
07-59598.

WHEREFORE, the Court DISMISSES the baseless disbarment complaints against Atty. Federico
S. Tolentino, Jr., Atty. Renato G. Cunanan, Atty. Daniel F. Victoria, Jr., Atty. Elbert T. Quilala and
Atty. Constante P. Caluya, Jr.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

G.R. No. 102007 September 2, 1994

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,


vs.
ROGELIO BAYOTAS y CORDOVA, accused-appellant.

The Solicitor General for plaintiff-appellee.

Public Attorney's Office for accused-appellant.

ROMERO, J.:

In Criminal Case No. C-3217 filed before Branch 16, RTC Roxas City, Rogelio Bayotas y Cordova
was charged with Rape and eventually convicted thereof on June 19, 1991 in a decision penned
by Judge Manuel E. Autajay. Pending appeal of his conviction, Bayotas died on February 4, 1992
at
the National Bilibid Hospital due to cardio respiratory arrest secondary to hepatic
encephalopathy secondary to hipato carcinoma gastric malingering. Consequently, the Supreme
Court in its Resolution of May 20, 1992 dismissed the criminal aspect of the appeal. However, it
required the Solicitor General to file its comment with regard to Bayotas' civil liability arising
from his commission of the offense charged.

In his comment, the Solicitor General expressed his view that the death of accused-appellant did
not extinguish his civil liability as a result of his commission of the offense charged. The Solicitor
General, relying on the case of People v. Sendaydiego 1 insists that the appeal should still be
resolved for the purpose of reviewing his conviction by the lower court on which the civil liability
is based.
Counsel for the accused-appellant, on the other hand, opposed the view of the Solicitor General
arguing that the death of the accused while judgment of conviction is pending appeal
extinguishes both his criminal and civil penalties. In support of his position, said counsel invoked
the ruling of the Court of Appeals in People v. Castillo and Ocfemia 2 which held that the civil
obligation in a criminal case takes root in the criminal liability and, therefore, civil liability is
extinguished if accused should die before final judgment is rendered.

We are thus confronted with a single issue: Does death of the accused pending appeal of his
conviction extinguish his civil liability?

In the aforementioned case of People v. Castillo, this issue was settled in the affirmative. This
same issue posed therein was phrased thus: Does the death of Alfredo Castillo affect both his
criminal responsibility and his civil liability as a consequence of the alleged crime?

It resolved this issue thru the following disquisition:

Article 89 of the Revised Penal Code is the controlling statute. It reads, in part:

Art. 89. How criminal liability is totally extinguished. — Criminal liability is totally
extinguished:

1. By the death of the convict, as to the personal penalties; and as to the pecuniary penalties
liability therefor is extinguished only when the death of the offender occurs before final
judgment;

With reference to Castillo's criminal liability, there is no question. The law is plain. Statutory
construction is unnecessary. Said liability is extinguished.

The civil liability, however, poses a problem. Such liability is extinguished only when the death of
the offender occurs before final judgment. Saddled upon us is the task of ascertaining the legal
import of the term "final judgment." Is it final judgment as contradistinguished from an
interlocutory order? Or, is it a judgment which is final and executory?

We go to the genesis of the law. The legal precept contained in Article 89 of the Revised Penal
Code heretofore transcribed is lifted from Article 132 of the Spanish El Codigo Penal de 1870
which, in part, recites:

La responsabilidad penal se extingue.

1. Por la muerte del reo en cuanto a las penas personales siempre, y respecto a las
pecuniarias, solo cuando a su fallecimiento no hubiere recaido sentencia firme.

xxx xxx xxx

The code of 1870 . . . it will be observed employs the term "sentencia firme." What is "sentencia
firme" under the old statute?
XXVIII Enciclopedia Juridica Española, p. 473, furnishes the ready answer: It says:

SENTENCIA FIRME. La sentencia que adquiere la fuerza de las definitivas por no haberse
utilizado por las partes litigantes recurso alguno contra ella dentro de los terminos y plazos
legales concedidos al efecto.

"Sentencia firme" really should be understood as one which is definite. Because, it is only when
judgment is such that, as Medina y Maranon puts it, the crime is confirmed — "en condena
determinada;" or, in the words of Groizard, the guilt of the accused becomes — "una verdad
legal." Prior thereto, should the accused die, according to Viada, "no hay legalmente, en tal caso,
ni reo, ni delito, ni responsabilidad criminal de ninguna clase." And, as Judge Kapunan well
explained, when a defendant dies before judgment becomes executory, "there cannot be any
determination by final judgment whether or not the felony upon which the civil action might arise
exists," for the simple reason that "there is no party defendant." (I Kapunan, Revised Penal
Code, Annotated, p. 421. Senator Francisco holds the same view. Francisco, Revised Penal Code,
Book One, 2nd ed., pp. 859-860)

The legal import of the term "final judgment" is similarly reflected in the Revised Penal Code.
Articles 72 and 78 of that legal body mention the term "final judgment" in the sense that it is
already enforceable. This also brings to mind Section 7, Rule 116 of the Rules of Court which
states that a judgment in a criminal case becomes final "after the lapse of the period for
perfecting an appeal or when the sentence has been partially or totally satisfied or served, or the
defendant has expressly waived in writing his right to appeal."

By fair intendment, the legal precepts and opinions here collected funnel down to one positive
conclusion: The term final judgment employed in the Revised Penal Code means judgment
beyond recall. Really, as long as a judgment has not become executory, it cannot be truthfully
said that defendant is definitely guilty of the felony charged against him.

Not that the meaning thus given to final judgment is without reason. For where, as in this case,
the right to institute a separate civil action is not reserved, the decision to be rendered must, of
necessity, cover "both the criminal and the civil aspects of the case." People vs. Yusico
(November 9, 1942), 2 O.G., No. 100, p. 964. See also: People vs. Moll, 68 Phil., 626, 634;
Francisco, Criminal Procedure, 1958 ed., Vol. I, pp. 234, 236. Correctly, Judge Kapunan observed
that as "the civil action is based solely on the felony committed and of which the offender might
be found guilty, the death of the offender extinguishes the civil liability." I Kapunan, Revised
Penal Code, Annotated, supra.

Here is the situation obtaining in the present case: Castillo's criminal liability is out. His civil
liability is sought to be enforced by reason of that criminal liability. But then, if we dismiss, as we
must, the criminal action and let the civil aspect remain, we will be faced with the anomalous
situation whereby we will be called upon to clamp civil liability in a case where the source thereof
— criminal liability — does not exist. And, as was well stated in Bautista, et al. vs. Estrella, et al.,
CA-G.R.
No. 19226-R, September 1, 1958, "no party can be found and held criminally liable in a civil suit,"
which solely would remain if we are to divorce it from the criminal proceeding."
This ruling of the Court of Appeals in the Castillo case 3 was adopted by the Supreme Court in
the cases of People of the Philippines v. Bonifacio Alison, et al., 4 People of the Philippines v.
Jaime Jose, et al. 5 and People of the Philippines v. Satorre 6 by dismissing the appeal in view of
the death of the accused pending appeal of said cases.

As held by then Supreme Court Justice Fernando in the Alison case:

The death of accused-appellant Bonifacio Alison having been established, and considering that
there is as yet no final judgment in view of the pendency of the appeal, the criminal and civil
liability of the said accused-appellant Alison was extinguished by his death (Art. 89, Revised Penal
Code; Reyes' Criminal Law, 1971 Rev. Ed., p. 717, citing People v. Castillo and Ofemia C.A., 56
O.G. 4045); consequently, the case against him should be dismissed.

On the other hand, this Court in the subsequent cases of Buenaventura Belamala v. Marcelino
Polinar 7 and Lamberto Torrijos v. The Honorable Court of Appeals 8 ruled differently. In the
former, the issue decided by this court was: Whether the civil liability of one accused of physical
injuries who died before final judgment is extinguished by his demise to the extent of barring any
claim therefore against his estate. It was the contention of the administrator-appellant therein
that the death of the accused prior to final judgment extinguished all criminal and civil liabilities
resulting from the offense, in view of Article 89, paragraph 1 of the Revised Penal Code.
However, this court ruled therein:

We see no merit in the plea that the civil liability has been extinguished, in view of the provisions
of the Civil Code of the Philippines of 1950 (Rep. Act No. 386) that became operative eighteen
years after the revised Penal Code. As pointed out by the Court below, Article 33 of the Civil
Code establishes a civil action for damages on account of physical injuries, entirely separate and
distinct from the criminal action.

Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for damages,
entirely separate and distinct from the criminal action, may be brought by the injured party. Such
civil action shall proceed independently of the criminal prosecution, and shall require only a
preponderance of evidence.

Assuming that for lack of express reservation, Belamala's civil action for damages was to be
considered instituted together with the criminal action still, since both proceedings were
terminated without final adjudication, the civil action of the offended party under Article 33 may
yet be enforced separately.

In Torrijos, the Supreme Court held that:

xxx xxx xxx

It should be stressed that the extinction of civil liability follows the extinction of the criminal
liability under Article 89, only when the civil liability arises from the criminal act as its only basis.
Stated differently, where the civil liability does not exist independently of the criminal
responsibility, the extinction of the latter by death, ipso facto extinguishes the former, provided,
of course, that death supervenes before final judgment. The said principle does not apply in
instant case wherein the civil liability springs neither solely nor originally from the crime itself but
from a civil contract of purchase and sale. (Emphasis ours)

xxx xxx xxx

In the above case, the court was convinced that the civil liability of the accused who was charged
with estafa could likewise trace its genesis to Articles 19, 20 and 21 of the Civil Code since said
accused had swindled the first and second vendees of the property subject matter of the
contract of sale. It therefore concluded: "Consequently, while the death of the accused herein
extinguished his criminal liability including fine, his civil liability based on the laws of human
relations remains."

Thus it allowed the appeal to proceed with respect to the civil liability of the accused,
notwithstanding the extinction of his criminal liability due to his death pending appeal of his
conviction.

To further justify its decision to allow the civil liability to survive, the court relied on the following
ratiocination: Since Section 21, Rule 3 of the Rules of Court 9 requires the dismissal of all money
claims against the defendant whose death occurred prior to the final judgment of the Court of
First Instance (CFI), then it can be inferred that actions for recovery of money may continue to be
heard on appeal, when the death of the defendant supervenes after the CFI had rendered its
judgment. In such case, explained this tribunal, "the name of the offended party shall be included
in the title of the case as plaintiff-appellee and the legal representative or the heirs of the
deceased-accused should be substituted as defendants-appellants."

It is, thus, evident that as jurisprudence evolved from Castillo to Torrijos, the rule established was
that the survival of the civil liability depends on whether the same can be predicated on sources
of obligations other than delict. Stated differently, the claim for civil liability is also extinguished
together with the criminal action if it were solely based thereon, i.e., civil liability ex delicto.

However, the Supreme Court in People v. Sendaydiego, et al. 10 departed from this long-
established principle of law. In this case, accused Sendaydiego was charged with and convicted
by the lower court of malversation thru falsification of public documents. Sendaydiego's death
supervened during the pendency of the appeal of his conviction.

This court in an unprecedented move resolved to dismiss Sendaydiego's appeal but only to the
extent of his criminal liability. His civil liability was allowed to survive although it was clear that
such claim thereon was exclusively dependent on the criminal action already extinguished. The
legal import of such decision was for the court to continue exercising appellate jurisdiction over
the entire appeal, passing upon the correctness of Sendaydiego's conviction despite dismissal of
the criminal action, for the purpose of determining if he is civilly liable. In doing so, this Court
issued a Resolution of July 8, 1977 stating thus:

The claim of complainant Province of Pangasinan for the civil liability survived Sendaydiego
because his death occurred after final judgment was rendered by the Court of First Instance of
Pangasinan, which convicted him of three complex crimes of malversation through falsification
and ordered him to indemnify the Province in the total sum of P61,048.23 (should be
P57,048.23).

The civil action for the civil liability is deemed impliedly instituted with the criminal action in the
absence of express waiver or its reservation in a separate action (Sec. 1, Rule 111 of the Rules of
Court). The civil action for the civil liability is separate and distinct from the criminal action
(People and Manuel vs. Coloma, 105 Phil. 1287; Roa vs. De la Cruz, 107 Phil. 8).

When the action is for the recovery of money and the defendant dies before final judgment in
the Court of First Instance, it shall be dismissed to be prosecuted in the manner especially
provided in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the Rules of Court).

The implication is that, if the defendant dies after a money judgment had been rendered against
him by the Court of First Instance, the action survives him. It may be continued on appeal
(Torrijos vs. Court of Appeals, L-40336, October 24, 1975; 67 SCRA 394).

The accountable public officer may still be civilly liable for the funds improperly disbursed
although he has no criminal liability (U.S. vs. Elvina, 24 Phil. 230; Philippine National Bank vs.
Tugab, 66 Phil. 583).

In view of the foregoing, notwithstanding the dismissal of the appeal of the deceased
Sendaydiego insofar as his criminal liability is concerned, the Court Resolved to continue
exercising appellate jurisdiction over his possible civil liability for the money claims of the
Province of Pangasinan arising from the alleged criminal acts complained of, as if no criminal case
had been instituted against him, thus making applicable, in determining his civil liability, Article
30 of the Civil Code . . . and, for that purpose, his counsel is directed to inform this Court within
ten (10) days of the names and addresses of the decedent's heirs or whether or not his estate is
under administration and has a duly appointed judicial administrator. Said heirs or administrator
will be substituted for the deceased insofar as the civil action for the civil liability is concerned
(Secs. 16 and 17, Rule 3, Rules of Court).

Succeeding cases 11 raising the identical issue have maintained adherence to our ruling in
Sendaydiego; in other words, they were a reaffirmance of our abandonment of the settled rule
that a civil liability solely anchored on the criminal (civil liability ex delicto) is extinguished upon
dismissal of the entire appeal due to the demise of the accused.

But was it judicious to have abandoned this old ruling? A re-examination of our decision in
Sendaydiego impels us to revert to the old ruling.

To restate our resolution of July 8, 1977 in Sendaydiego: The resolution of the civil action
impliedly instituted in the criminal action can proceed irrespective of the latter's extinction due
to death of the accused pending appeal of his conviction, pursuant to Article 30 of the Civil Code
and Section 21, Rule 3 of the Revised Rules of Court.

Article 30 of the Civil Code provides:

When a separate civil action is brought to demand civil liability arising from a criminal offense,
and no criminal proceedings are instituted during the pendency of the civil case, a
preponderance of evidence shall likewise be sufficient to prove the act complained of.

Clearly, the text of Article 30 could not possibly lend support to the ruling in Sendaydiego.
Nowhere in its text is there a grant of authority to continue exercising appellate jurisdiction over
the accused's civil liability ex delicto when his death supervenes during appeal. What Article 30
recognizes is an alternative and separate civil action which may be brought to demand civil
liability arising from a criminal offense independently of any criminal action. In the event that no
criminal proceedings are instituted during the pendency of said civil case, the quantum of
evidence needed to prove the criminal act will have to be that which is compatible with civil
liability and that is, preponderance of evidence and not proof of guilt beyond reasonable doubt.
Citing or invoking Article 30 to justify the survival of the civil action despite extinction of the
criminal would in effect merely beg the question of whether civil liability ex delicto survives upon
extinction of the criminal action due to death of the accused during appeal of his conviction. This
is because whether asserted in
the criminal action or in a separate civil action, civil liability ex delicto is extinguished by the
death of the accused while his conviction is on appeal. Article 89 of the Revised Penal Code is
clear on this matter:

Art. 89. How criminal liability is totally extinguished. — Criminal liability is totally
extinguished:

1. By the death of the convict, as to the personal penalties; and as to pecuniary penalties,
liability therefor is extinguished only when the death of the offender occurs before final
judgment;

xxx xxx xxx

However, the ruling in Sendaydiego deviated from the expressed intent of Article 89. It allowed
claims for civil liability ex delicto to survive by ipso facto treating the civil action impliedly
instituted with the criminal, as one filed under Article 30, as though no criminal proceedings had
been filed but merely a separate civil action. This had the effect of converting such claims from
one which is dependent on the outcome of the criminal action to an entirely new and separate
one, the prosecution of which does not even necessitate the filing of criminal proceedings. 12
One would be hard put to pinpoint the statutory authority for such a transformation. It is to be
borne in mind that in recovering civil liability ex delicto, the same has perforce to be determined
in the criminal action, rooted as it is in the court's pronouncement of the guilt or innocence of the
accused. This is but to render fealty to the intendment of Article 100 of the Revised Penal Code
which provides that "every person criminally liable for a felony is also civilly liable." In such cases,
extinction of the criminal action due to death of the accused pending appeal inevitably signifies
the concomitant extinction of the civil liability. Mors Omnia Solvi. Death dissolves all things.

In sum, in pursuing recovery of civil liability arising from crime, the final determination of the
criminal liability is a condition precedent to the prosecution of the civil action, such that when the
criminal action is extinguished by the demise of accused-appellant pending appeal thereof, said
civil action cannot survive. The claim for civil liability springs out of and is dependent upon facts
which, if true, would constitute a crime. Such civil liability is an inevitable consequence of the
criminal liability and is to be declared and enforced in the criminal proceeding. This is to be
distinguished from that which is contemplated under Article 30 of the Civil Code which refers to
the institution of a separate civil action that does not draw its life from a criminal proceeding. The
Sendaydiego resolution of July 8, 1977, however, failed to take note of this fundamental
distinction when it allowed the survival of the civil action for the recovery of civil liability ex
delicto by treating the same as a separate civil action referred to under Article 30. Surely, it will
take more than just a summary judicial pronouncement to authorize the conversion of said civil
action to an independent one such as that contemplated under Article 30.

Ironically however, the main decision in Sendaydiego did not apply Article 30, the resolution of
July 8, 1977 notwithstanding. Thus, it was held in the main decision:

Sendaydiego's appeal will be resolved only for the purpose of showing his criminal liability which
is the basis of the civil liability for which his estate would be liable. 13

In other words, the Court, in resolving the issue of his civil liability, concomitantly made a
determination on whether Sendaydiego, on the basis of evidenced adduced, was indeed guilty
beyond reasonable doubt of committing the offense charged. Thus, it upheld Sendaydiego's
conviction and pronounced the same as the source of his civil liability. Consequently, although
Article 30 was not applied in the final determination of Sendaydiego's civil liability, there was a
reopening of the criminal action already extinguished which served as basis for Sendaydiego's
civil liability. We reiterate: Upon death of the accused pending appeal of his conviction, the
criminal action is extinguished inasmuch as there is no longer a defendant to stand as the
accused; the civil action instituted therein for recovery of civil liability ex delicto is ipso facto
extinguished, grounded as it is on the criminal.

Section 21, Rule 3 of the Rules of Court was also invoked to serve as another basis for the
Sendaydiego resolution of July 8, 1977. In citing Sec. 21, Rule 3 of the Rules of Court, the Court
made the inference that civil actions of the type involved in Sendaydiego consist of money
claims, the recovery of which may be continued on appeal if defendant dies pending appeal of
his conviction by holding his estate liable therefor. Hence, the Court's conclusion:

"When the action is for the recovery of money" "and the defendant dies before final judgment in
the court of First Instance, it shall be dismissed to be prosecuted in the manner especially
provided" in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the Rules of Court).

The implication is that, if the defendant dies after a money judgment had been rendered against
him by the Court of First Instance, the action survives him. It may be continued on appeal.

Sadly, reliance on this provision of law is misplaced. From the standpoint of procedural law, this
course taken in Sendaydiego cannot be sanctioned. As correctly observed by Justice Regalado:

xxx xxx xxx

I do not, however, agree with the justification advanced in both Torrijos and Sendaydiego which,
relying on the provisions of Section 21, Rule 3 of the Rules of Court, drew the strained
implication therefrom that where the civil liability instituted together with the criminal liabilities
had already passed beyond the judgment of the then Court of First Instance (now the Regional
Trial Court), the Court of Appeals can continue to exercise appellate jurisdiction thereover
despite the extinguishment of the component criminal liability of the deceased. This
pronouncement, which has been followed in the Court's judgments subsequent and consonant to
Torrijos and Sendaydiego, should be set aside and abandoned as being clearly erroneous and
unjustifiable.

Said Section 21 of Rule 3 is a rule of civil procedure in ordinary civil actions. There is neither
authority nor justification for its application in criminal procedure to civil actions instituted
together with and as part of criminal actions. Nor is there any authority in law for the summary
conversion from the latter category of an ordinary civil action upon the death of the offender. . . .

Moreover, the civil action impliedly instituted in a criminal proceeding for recovery of civil liability
ex delicto can hardly be categorized as an ordinary money claim such as that referred to in Sec.
21, Rule 3 enforceable before the estate of the deceased accused.

Ordinary money claims referred to in Section 21, Rule 3 must be viewed in light of the provisions
of Section 5, Rule 86 involving claims against the estate, which in Sendaydiego was held liable for
Sendaydiego's civil liability. "What are contemplated in Section 21 of Rule 3, in relation to
Section 5 of Rule 86, 14 are contractual money claims while the claims involved in civil liability ex
delicto may include even the restitution of personal or real property." 15 Section 5, Rule 86
provides an exclusive enumeration of what claims may be filed against the estate. These are:
funeral expenses, expenses for the last illness, judgments for money and claim arising from
contracts, expressed or implied. It is clear that money claims arising from delict do not form part
of this exclusive enumeration. Hence, there could be no legal basis in (1) treating a civil action ex
delicto as an ordinary contractual money claim referred to in Section 21, Rule 3 of the Rules of
Court and (2) allowing it to survive by filing a claim therefor before the estate of the deceased
accused. Rather, it should be extinguished upon extinction of the criminal action engendered by
the death of the accused pending finality of his conviction.

Accordingly, we rule: if the private offended party, upon extinction of the civil liability ex delicto
desires to recover damages from the same act or omission complained of, he must subject to
Section 1, Rule 111 16 (1985 Rules on Criminal Procedure as amended) file a separate civil action,
this time predicated not on the felony previously charged but on other sources of obligation. The
source of obligation upon which the separate civil action is premised determines against whom
the same shall be enforced.

If the same act or omission complained of also arises from quasi-delict or may, by provision of
law, result in an injury to person or property (real or personal), the separate civil action must be
filed against the executor or administrator 17 of the estate of the accused pursuant to Sec. 1,
Rule 87 of the Rules of Court:

Sec. 1. Actions which may and which may not be brought against executor or administrator. —
No action upon a claim for the recovery of money or debt or interest thereon shall be
commenced against the executor or administrator; but actions to recover real or personal
property, or an interest therein, from the estate, or to enforce a lien thereon, and actions to
recover damages for an injury to person or property, real or personal, may be commenced
against him.
This is in consonance with our ruling in Belamala 18 where we held that, in recovering damages
for injury to persons thru an independent civil action based on Article 33 of the Civil Code, the
same must be filed against the executor or administrator of the estate of deceased accused and
not against the estate under Sec. 5, Rule 86 because this rule explicitly limits the claim to those
for funeral expenses, expenses for the last sickness of the decedent, judgment for money and
claims arising from contract, express or implied. Contractual money claims, we stressed, refers
only to purely personal obligations other than those which have their source in delict or tort.

Conversely, if the same act or omission complained of also arises from contract, the separate civil
action must be filed against the estate of the accused, pursuant to Sec. 5, Rule 86 of the Rules of
Court.

From this lengthy disquisition, we summarize our ruling herein:

1. Death of the accused pending appeal of his conviction extinguishes his criminal liability as
well as the civil liability based solely thereon. As opined by Justice Regalado, in this regard, "the
death of the accused prior to final judgment terminates his criminal liability and only the civil
liability directly arising from and based solely on the offense committed, i.e., civil liability ex
delicto in senso strictiore."

2. Corollarily, the claim for civil liability survives notwithstanding the death of accused, if the
same may also be predicated on a source of obligation other than delict. 19 Article 1157 of the
Civil Code enumerates these other sources of obligation from which the civil liability may arise as
a result of the same act or omission:

a) Law 20

b) Contracts

c) Quasi-contracts

d) ...

e) Quasi-delicts

3. Where the civil liability survives, as explained in Number 2 above, an action for recovery
therefor may be pursued but only by way of filing a separate civil action and subject to Section 1,
Rule 111 of the 1985 Rules on Criminal Procedure as amended. This separate civil action may be
enforced either against the executor/administrator or the estate of the accused, depending on
the source of obligation upon which the same is based as explained above.

4. Finally, the private offended party need not fear a forfeiture of his right to file this
separate civil action by prescription, in cases where during the prosecution of the criminal action
and prior to its extinction, the private-offended party instituted together therewith the civil
action. In such case, the statute of limitations on the civil liability is deemed interrupted during
the pendency of the criminal case, conformably with provisions of Article 1155 21 of the Civil
Code, that should thereby avoid any apprehension on a possible privation of right by
prescription. 22

Applying this set of rules to the case at bench, we hold that the death of appellant Bayotas
extinguished his criminal liability and the civil liability based solely on the act complained of, i.e.,
rape. Consequently, the appeal is hereby dismissed without qualification.

WHEREFORE, the appeal of the late Rogelio Bayotas is DISMISSED with costs de oficio.

SO ORDERED.

G.R. No. 155223 April 4, 2007

BOBIE ROSE V. FRIAS, represented by her Attorney-in-fact, MARIE F. FUJITA, Petitioner,


vs.
FLORA SAN DIEGO-SISON, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Before us is a Petition for Review on Certiorari filed by Bobie Rose V. Frias represented by her
Attorney-in-fact, Marie Regine F. Fujita (petitioner) seeking to annul the Decision1 dated June 18,
2002 and the Resolution2 dated September 11, 2002 of the Court of Appeals (CA) in CA-G.R. CV
No. 52839.

Petitioner is the owner of a house and lot located at No. 589 Batangas East, Ayala Alabang,
Muntinlupa, Metro Manila, which she acquired from Island Masters Realty and Development
Corporation (IMRDC) by virtue of a Deed of Sale dated Nov. 16, 1990.3 The property is covered
by TCT No. 168173 of the Register of Deeds of Makati in the name of IMRDC.4

On December 7, 1990, petitioner, as the FIRST PARTY, and Dra. Flora San Diego-Sison
(respondent), as the SECOND PARTY, entered into a Memorandum of Agreement5 over the
property with the following terms:

NOW, THEREFORE, for and in consideration of the sum of THREE MILLION PESOS
(₱3,000,000.00) receipt of which is hereby acknowledged by the FIRST PARTY from the SECOND
PARTY, the parties have agreed as follows:

1. That the SECOND PARTY has a period of Six (6) months from the date of the execution of this
contract within which to notify the FIRST PARTY of her intention to purchase the aforementioned
parcel of land together within (sic) the improvements thereon at the price of SIX MILLION FOUR
HUNDRED THOUSAND PESOS (₱6,400,000.00). Upon notice to the FIRST PARTY of the
SECOND PARTY’s intention to purchase the same, the latter has a period of another six months
within which to pay the remaining balance of ₱3.4 million.

2. That prior to the six months period given to the SECOND PARTY within which to decide
whether or not to purchase the above-mentioned property, the FIRST PARTY may still offer the
said property to other persons who may be interested to buy the same provided that the amount
of ₱3,000,000.00 given to the FIRST PARTY BY THE SECOND PARTY shall be paid to the latter
including interest based on prevailing compounded bank interest plus the amount of the sale in
excess of ₱7,000,000.00 should the property be sold at a price more than ₱7 million.

3. That in case the FIRST PARTY has no other buyer within the first six months from the execution
of this contract, no interest shall be charged by the SECOND PARTY on the P3 million however,
in the event that on the sixth month the SECOND PARTY would decide not to purchase the
aforementioned property, the FIRST PARTY has a period of another six months within which to
pay the sum of ₱3 million pesos provided that the said amount shall earn compounded bank
interest for the last six months only. Under this circumstance, the amount of P3 million given by
the SECOND PARTY shall be treated as [a] loan and the property shall be considered as the
security for the mortgage which can be enforced in accordance with law.

x x x x.6

Petitioner received from respondent two million pesos in cash and one million pesos in a post-
dated check dated February 28, 1990, instead of 1991, which rendered said check stale.7
Petitioner then gave respondent TCT No. 168173 in the name of IMRDC and the Deed of
Absolute Sale over the property between petitioner and IMRDC.

Respondent decided not to purchase the property and notified petitioner through a letter8
dated March 20, 1991, which petitioner received only on June 11, 1991,9 reminding petitioner of
their agreement that the amount of two million pesos which petitioner received from respondent
should be considered as a loan payable within six months. Petitioner subsequently failed to pay
respondent the amount of two million pesos.

On April 1, 1993, respondent filed with the Regional Trial Court (RTC) of Manila, a complaint10
for sum of money with preliminary attachment against petitioner. The case was docketed as Civil
Case No. 93-65367 and raffled to Branch 30. Respondent alleged the foregoing facts and in
addition thereto averred that petitioner tried to deprive her of the security for the loan by
making a false report11 of the loss of her owner’s copy of TCT No. 168173 to the Tagig Police
Station on June 3, 1991, executing an affidavit of loss and by filing a petition12 for the issuance
of a new owner’s duplicate copy of said title with the RTC of Makati, Branch 142; that the
petition was granted in an Order13 dated August 31, 1991; that said Order was subsequently set
aside in an Order dated April 10, 199214 where the RTC Makati granted respondent’s petition
for relief from judgment due to the fact that respondent is in possession of the owner’s duplicate
copy of TCT No. 168173, and ordered the provincial public prosecutor to conduct an
investigation of petitioner for perjury and false testimony. Respondent prayed for the ex-parte
issuance of a writ of preliminary attachment and payment of two million pesos with interest at
36% per annum from December 7, 1991, ₱100,000.00 moral, corrective and exemplary damages
and ₱200,000.00 for attorney’s fees.

In an Order dated April 6, 1993, the Executive Judge of the RTC of Manila issued a writ of
preliminary attachment upon the filing of a bond in the amount of two million pesos.15
Petitioner filed an Amended Answer16 alleging that the Memorandum of Agreement was
conceived and arranged by her lawyer, Atty. Carmelita Lozada, who is also respondent’s lawyer;
that she was asked to sign the agreement without being given the chance to read the same; that
the title to the property and the Deed of Sale between her and the IMRDC were entrusted to
Atty. Lozada for safekeeping and were never turned over to respondent as there was no
consummated sale yet; that out of the two million pesos cash paid, Atty. Lozada took the one
million pesos which has not been returned, thus petitioner had filed a civil case against her; that
she was never informed of respondent’s decision not to purchase the property within the six
month period fixed in the agreement; that when she demanded the return of TCT No. 168173
and the Deed of Sale between her and the IMRDC from Atty. Lozada, the latter gave her these
documents in a brown envelope on May 5, 1991 which her secretary placed in her attache case;
that the envelope together with her other personal things were lost when her car was forcibly
opened the following day; that she sought the help of Atty. Lozada who advised her to secure a
police report, to execute an affidavit of loss and to get the services of another lawyer to file a
petition for the issuance of an owner’s duplicate copy; that the petition for the issuance of a new
owner’s duplicate copy was filed on her behalf without her knowledge and neither did she sign
the petition nor testify in court as falsely claimed for she was abroad; that she was a victim of the
manipulations of Atty. Lozada and respondent as shown by the filing of criminal charges for
perjury and false testimony against her; that no interest could be due as there was no valid
mortgage over the property as the principal obligation is vitiated with fraud and deception. She
prayed for the dismissal of the complaint, counter-claim for damages and attorney’s fees.

Trial on the merits ensued. On January 31, 1996, the RTC issued a decision,17 the dispositive
portion of which reads:

WHEREFORE, judgment is hereby RENDERED:

1) Ordering defendant to pay plaintiff the sum of P2 Million plus interest thereon at the rate of
thirty two (32%) per cent per annum beginning December 7, 1991 until fully paid.

2) Ordering defendant to pay plaintiff the sum of ₱70,000.00 representing premiums paid by
plaintiff on the attachment bond with legal interest thereon counted from the date of this
decision until fully paid.

3) Ordering defendant to pay plaintiff the sum of ₱100,000.00 by way of moral, corrective and
exemplary damages.

4) Ordering defendant to pay plaintiff attorney’s fees of ₱100,000.00 plus cost of litigation.18

The RTC found that petitioner was under obligation to pay respondent the amount of two million
pesos with compounded interest pursuant to their Memorandum of Agreement; that the
fraudulent scheme employed by petitioner to deprive respondent of her only security to her
loaned money when petitioner executed an affidavit of loss and instituted a petition for the
issuance of an owner’s duplicate title knowing the same was in respondent’s possession, entitled
respondent to moral damages; and that petitioner’s bare denial cannot be accorded credence
because her testimony and that of her witness did not appear to be credible.
The RTC further found that petitioner admitted that she received from respondent the two
million pesos in cash but the fact that petitioner gave the one million pesos to Atty. Lozada was
without respondent’s knowledge thus it is not binding on respondent; that respondent had also
proven that in 1993, she initially paid the sum of ₱30,000.00 as premium for the issuance of the
attachment bond, ₱20,000.00 for its renewal in 1994, and ₱20,000.00 for the renewal in 1995,
thus plaintiff should be reimbursed considering that she was compelled to go to court and ask
for a writ of preliminary attachment to protect her rights under the agreement.

Petitioner filed her appeal with the CA. In a Decision dated June 18, 2002, the CA affirmed the
RTC decision with modification, the dispositive portion of which reads:

WHEREFORE, premises considered, the decision appealed from is MODIFIED in the sense that
the rate of interest is reduced from 32% to 25% per annum, effective June 7, 1991 until fully
paid.19

The CA found that: petitioner gave the one million pesos to Atty. Lozada partly as her
commission and partly as a loan; respondent did not replace the mistakenly dated check of one
million pesos because she had decided not to buy the property and petitioner knew of her
decision as early as April 1991; the award of moral damages was warranted since even granting
petitioner had no hand in the filing of the petition for the issuance of an owner’s copy, she
executed an affidavit of loss of TCT No. 168173 when she knew all along that said title was in
respondent’s possession; petitioner’s claim that she thought the title was lost when the brown
envelope given to her by Atty. Lozada was stolen from her car was hollow; that such deceitful
conduct caused respondent serious anxiety and emotional distress.

The CA concluded that there was no basis for petitioner to say that the interest should be
charged for six months only and no more; that a loan always bears interest otherwise it is not a
loan; that interest should commence on June 7, 199120 with compounded bank interest
prevailing at the time the two million was considered as a loan which was in June 1991; that the
bank interest rate for loans secured by a real estate mortgage in 1991 ranged from 25% to 32%
per annum as certified to by Prudential Bank,21 that in fairness to petitioner, the rate to be
charged should be 25% only.

Petitioner’s motion for reconsideration was denied by the CA in a Resolution dated September
11, 2002.

Hence the instant Petition for Review on Certiorari filed by petitioner raising the following issues:

(A) WHETHER OR NOT THE COMPOUNDED BANK INTEREST SHOULD BE LIMITED TO SIX (6)
MONTHS AS CONTAINED IN THE MEMORANDUM OF AGREEMENT.

(B) WHETHER OR NOT THE RESPONDENT IS ENTITLED TO MORAL DAMAGES.

(C) WHETHER OR NOT THE GRANT OF CORRECTIVE AND EXEMPLARY DAMAGES AND
ATTORNEY’S FEES IS PROPER EVEN IF NOT MENTIONED IN THE TEXT OF THE DECISION.22

Petitioner contends that the interest, whether at 32% per annum awarded by the trial court or at
25% per annum as modified by the CA which should run from June 7, 1991 until fully paid, is
contrary to the parties’ Memorandum of Agreement; that the agreement provides that if
respondent would decide not to purchase the property, petitioner has the period of another six
months to pay the loan with compounded bank interest for the last six months only; that the
CA’s ruling that a loan always bears interest otherwise it is not a loan is contrary to Art. 1956 of
the New Civil Code which provides that no interest shall be due unless it has been expressly
stipulated in writing.

We are not persuaded.

While the CA’s conclusion, that a loan always bears interest otherwise it is not a loan, is flawed
since a simple loan may be gratuitous or with a stipulation to pay interest,23 we find no error
committed by the CA in awarding a 25% interest per annum on the two-million peso loan even
beyond the second six months stipulated period.

The Memorandum of Agreement executed between the petitioner and respondent on December
7, 1990 is the law between the parties. In resolving an issue based upon a contract, we must first
examine the contract itself, especially the provisions thereof which are relevant to the
controversy.24 The general rule is that if the terms of an agreement are clear and leave no doubt
as to the intention of the contracting parties, the literal meaning of its stipulations shall prevail.25
It is further required that the various stipulations of a contract shall be interpreted together,
attributing to the doubtful ones that sense which may result from all of them taken jointly.26

In this case, the phrase "for the last six months only" should be taken in the context of the entire
agreement. We agree with and adopt the CA’s interpretation of the phrase in this wise:

Their agreement speaks of two (2) periods of six months each. The first six-month period was
given to plaintiff-appellee (respondent) to make up her mind whether or not to purchase
defendant-appellant’s (petitioner's) property. The second six-month period was given to
defendant-appellant to pay the P2 million loan in the event that plaintiff-appellee decided not to
buy the subject property in which case interest will be charged "for the last six months only",
referring to the second six-month period. This means that no interest will be charged for the first
six-month period while appellee was making up her mind whether to buy the property, but only
for the second period of six months after appellee had decided not to buy the property. This is
the meaning of the phrase "for the last six months only". Certainly, there is nothing in their
agreement that suggests that interest will be charged for six months only even if it takes
defendant-appellant an eternity to pay the loan.27

The agreement that the amount given shall bear compounded bank interest for the last six
months only, i.e., referring to the second six-month period, does not mean that interest will no
longer be charged after the second six-month period since such stipulation was made on the
logical and reasonable expectation that such amount would be paid within the date stipulated.
Considering that petitioner failed to pay the amount given which under the Memorandum of
Agreement shall be considered as a loan, the monetary interest for the last six months continued
to accrue until actual payment of the loaned amount.

The payment of regular interest constitutes the price or cost of the use of money and thus, until
the principal sum due is returned to the creditor, regular interest continues to accrue since the
debtor continues to use such principal amount.28 It has been held that for a debtor to continue
in possession of the principal of the loan and to continue to use the same after maturity of the
loan without payment of the monetary interest, would constitute unjust enrichment on the part
of the debtor at the expense of the creditor.29

Petitioner and respondent stipulated that the loaned amount shall earn compounded bank
interests, and per the certification issued by Prudential Bank, the interest rate for loans in 1991
ranged from 25% to 32% per annum. The CA reduced the interest rate to 25% instead of the
32% awarded by the trial court which petitioner no longer assailed.1awphi1.nét

In Bautista v. Pilar Development Corp.,30 we upheld the validity of a 21% per annum interest on
a ₱142,326.43 loan. In Garcia v. Court of Appeals,31 we sustained the agreement of the parties
to a 24% per annum interest on an ₱8,649,250.00 loan. Thus, the interest rate of 25% per annum
awarded by the CA to a ₱2 million loan is fair and reasonable.

Petitioner next claims that moral damages were awarded on the erroneous finding that she used
a fraudulent scheme to deprive respondent of her security for the loan; that such finding is
baseless since petitioner was acquitted in the case for perjury and false testimony filed by
respondent against her.

We are not persuaded.

Article 31 of the Civil Code provides that when the civil action is based on an obligation not
arising from the act or omission complained of as a felony, such civil action may proceed
independently of the criminal proceedings and regardless of the result of the latter.32

While petitioner was acquitted in the false testimony and perjury cases filed by respondent
against her, those actions are entirely distinct from the collection of sum of money with damages
filed by respondent against petitioner.

We agree with the findings of the trial court and the CA that petitioner’s act of trying to deprive
respondent of the security of her loan by executing an affidavit of loss of the title and instituting
a petition for the issuance of a new owner’s duplicate copy of TCT No. 168173 entitles
respondent to moral damages.1a\^/phi1.net Moral damages may be awarded in culpa
contractual or breach of contract cases when the defendant acted fraudulently or in bad faith.
Bad faith does not simply connote bad judgment or negligence; it imports a dishonest purpose
or some moral obliquity and conscious doing of wrong. It partakes of the nature of fraud.33

The Memorandum of Agreement provides that in the event that respondent opts not to buy the
property, the money given by respondent to petitioner shall be treated as a loan and the
property shall be considered as the security for the mortgage. It was testified to by respondent
that after they executed the agreement on December 7, 1990, petitioner gave her the owner’s
copy of the title to the property, the Deed of Sale between petitioner and IMRDC, the certificate
of occupancy, and the certificate of the Secretary of the IMRDC who signed the Deed of Sale.34
However, notwithstanding that all those documents were in respondent’s possession, petitioner
executed an affidavit of loss that the owner’s copy of the title and the Deed of Sale were lost.
Although petitioner testified that her execution of the affidavit of loss was due to the fact that
she was of the belief that since she had demanded from Atty. Lozada the return of the title, she
thought that the brown envelope with markings which Atty. Lozada gave her on May 5, 1991
already contained the title and the Deed of Sale as those documents were in the same brown
envelope which she gave to Atty. Lozada prior to the transaction with respondent.35 Such
statement remained a bare statement. It was not proven at all since Atty. Lozada had not taken
the stand to corroborate her claim. In fact, even petitioner’s own witness, Benilda Ynfante
(Ynfante), was not able to establish petitioner's claim that the title was returned by Atty. Lozada
in view of Ynfante's testimony that after the brown envelope was given to petitioner, the latter
passed it on to her and she placed it in petitioner’s attaché case36 and did not bother to look at
the envelope.37

It is clear therefrom that petitioner’s execution of the affidavit of loss became the basis of the
filing of the petition with the RTC for the issuance of new owner’s duplicate copy of TCT No.
168173. Petitioner’s actuation would have deprived respondent of the security for her loan were
it not for respondent’s timely filing of a petition for relief whereby the RTC set aside its previous
order granting the issuance of new title. Thus, the award of moral damages is in order.

The entitlement to moral damages having been established, the award of exemplary damages is
proper.38 Exemplary damages may be imposed upon petitioner by way of example or correction
for the public good.39 The RTC awarded the amount of ₱100,000.00 as moral and exemplary
damages. While the award of moral and exemplary damages in an aggregate amount may not be
the usual way of awarding said damages,40 no error has been committed by CA. There is no
question that respondent is entitled to moral and exemplary damages.

Petitioner argues that the CA erred in awarding attorney’s fees because the trial court’s decision
did not explain the findings of facts and law to justify the award of attorney’s fees as the same
was mentioned only in the dispositive portion of the RTC decision.

We agree.

Article 220841 of the New Civil Code enumerates the instances where such may be awarded and,
in all cases, it must be reasonable, just and equitable if the same were to be granted.42
Attorney's fees as part of damages are not meant to enrich the winning party at the expense of
the losing litigant. They are not awarded every time a party prevails in a suit because of the
policy that no premium should be placed on the right to litigate.43 The award of attorney's fees
is the exception rather than the general rule. As such, it is necessary for the trial court to make
findings of facts and law that would bring the case within the exception and justify the grant of
such award. The matter of attorney's fees cannot be mentioned only in the dispositive portion of
the decision.44 They must be clearly explained and justified by the trial court in the body of its
decision. On appeal, the CA is precluded from supplementing the bases for awarding attorney’s
fees when the trial court failed to discuss in its Decision the reasons for awarding the same.
Consequently, the award of attorney's fees should be deleted.

WHEREFORE, in view of all the foregoing, the Decision dated June 18, 2002 and the Resolution
dated September 11, 2002 of the Court of Appeals in CA-G.R. CV No. 52839 are AFFIRMED with
MODIFICATION that the award of attorney’s fees is DELETED.

No pronouncement as to costs.

SO ORDERED.

SECOND DIVISION

JOHN DY,

Petitioner,

- versus -

PEOPLE OF THE PHILIPPINES and The HONORABLE COURT OF APPEALS,

Respondents.

G.R. No. 158312

Present:

QUISUMBING, Acting C.J.,

Chairperson,

CARPIO MORALES,

TINGA,
VELASCO, JR., and

BRION, JJ.

Promulgated:

November 14, 2008

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION
QUISUMBING, Acting C.J.:

This appeal prays for the reversal of the Decision[1] dated January 23, 2003 and the Resolution[2]
dated May 14, 2003 of the Court of Appeals in CA-G.R. CR No. 23802. The appellate court
affirmed with modification the Decision[3] dated November 17, 1999 of the Regional Trial Court
(RTC), Branch 82 of Quezon City, which had convicted petitioner John Dy of two counts of estafa
in Criminal Cases Nos. Q-93-46711 and Q-93-46713, and two counts of violation of Batas
Pambansa Bilang 22[4] (B.P. Blg. 22) in Criminal Cases Nos. Q-93-46712 and Q-93-46714.

The facts are undisputed:

Since 1990, John Dy has been the distributor of W.L. Food Products (W.L. Foods) in Naga City,
Bicol, under the business name Dyna Marketing. Dy would pay W.L. Foods in either cash or check
upon pick up of stocks of snack foods at the latters branch or main office in Quezon City. At
times, he would entrust the payment to one of his drivers.

On June 24, 1992, Dys driver went to the branch office of W.L. Foods to pick up stocks of snack
foods. He introduced himself to the checker, Mary Jane D. Maraca, who upon confirming Dys
credit with the main office, gave him merchandise worth P106,579.60. In return, the driver
handed her a blank Far East Bank and Trust Company (FEBTC) Check with Check No. 553602
postdated July 22, 1992. The check was signed by Dy though it did not indicate a specific
amount.

Yet again, on July 1, 1992, the same driver obtained snack foods from Maraca in the amount of
P226,794.36 in exchange for a blank FEBTC Check with Check No. 553615 postdated July 31,
1992.

In both instances, the driver was issued an unsigned delivery receipt. The amounts for the
purchases were filled in later by Evelyn Ong, accountant of W.L. Foods, based on the value of the
goods delivered.

When presented for payment, FEBTC dishonored the checks for insufficiency of funds. Raul D.
Gonzales, manager of FEBTC-Naga Branch, notified Atty. Rita Linda Jimeno, counsel of W.L.
Foods, of the dishonor. Apparently, Dy only had an available balance of P2,000 as of July 22,
1992 and July 31, 1992.

Later, Gonzales sent Atty. Jimeno another letter[5] advising her that FEBTC Check No. 553602
for P106,579.60 was returned to the drawee bank for the reasons stop payment order and drawn
against uncollected deposit (DAUD), and not because it was drawn against insufficient funds as
stated in the first letter. Dys savings deposit account ledger reflected a balance of P160,659.39
as of July 22, 1992. This, however, included a regional clearing check for P55,000 which he
deposited on July 20, 1992, and which took five (5) banking days to clear. Hence, the inward
check was drawn against the yet uncollected deposit.

When William Lim, owner of W.L. Foods, phoned Dy about the matter, the latter explained that
he could not pay since he had no funds yet. This prompted the former to send petitioner a
demand letter, which the latter ignored.

On July 16, 1993, Lim charged Dy with two counts of estafa under Article 315, paragraph 2(d)[6]
of the Revised Penal Code in two Informations, which except for the dates and amounts involved,
similarly read as follows:

That on or about the 24th day of June, 1992, in Quezon City, Philippines, the said accused, did
then and there [willfully] and feloniously defraud W.L. PRODUCTS, a corporation duly organized
and existing under the laws of the Republic of the Philippines with business address at No. 531
Gen. Luis St., Novaliches, this City, in the following manner, to wit: the said accused, by means of
false manifestations and fraudulent representation which he made to complainant to the effect
that Far East Bank and Trust Co. check No. 553602 dated July 22, 1992 in the amount of
P106,579.60, payable to W.L. Products is a good check and will be honored by the bank on its
maturity date, and by means of other deceit of similar import, induced and succeeded in inducing
the said complainant to receive and accept the aforesaid check in payment of snack foods, the
said accused knowing fully well that all his manifestations and representations were false and
untrue and were made solely for the purpose of obtaining, as in fact he did obtain the aforesaid
snack foods valued at P106,579.60 from said complainant as upon presentation of said check to
the bank for payment, the same was dishonored and payment thereof refused for the reason
stop payment and the said accused, once in possession of the aforesaid snack foods, with intent
to defraud, [willfully], unlawfully and feloniously misapplied, misappropriated and converted the
same or the value thereof to his own personal use and benefit, to the damage and prejudice of
said W.L. Products, herein represented by RODOLFO BORJAL, in the aforementioned amount of
P106,579.60, Philippine Currency.

Contrary to law.[7]

On even date, Lim also charged Dy with two counts of violation of B.P. Blg. 22 in two
Informations which likewise save for the dates and amounts involved similarly read as follows:

That on or about the 24th day of June, 1992, the said accused, did then and there [willfully],
unlawfully and feloniously make or draw and issue to W.L. FOOD PRODUCTS to apply on
account or for value a Far East Bank and Trust Co. Check no. 553602 dated July 22, 1992 payable
to W.L. FOOD PRODUCTS in the amount of P106,579.60 Philippine Currency, said accused
knowing fully well that at the time of issue he/she/they did not have sufficient funds in or credit
with the drawee bank for payment of such check in full upon its presentment, which check when
presented 90 days from the date thereof was subsequently dishonored by the drawee bank for
the reason Payment stopped but the same would have been dishonored for insufficient funds
had not the accused without any valid reason, ordered the bank to stop payment, the said
accused despite receipt of notice of such dishonor, failed to pay said W.L. Food Products the
amount of said check or to make arrangement for payment in full of the same within five (5)
banking days after receiving said notice.

CONTRARY TO LAW.[8]

On November 23, 1994, Dy was arrested in Naga City. On arraignment, he pleaded not guilty to
all charges. Thereafter, the cases against him were tried jointly.

On November 17, 1999 the RTC convicted Dy on two counts each of estafa and violation of B.P.
Blg. 22. The trial court disposed of the case as follows:

WHEREFORE, accused JOHN JERRY DY ALDEN (JOHN DY) is hereby found GUILTY beyond
reasonable doubt of swindling (ESTAFA) as charged in the Informations in Criminal Case No. 93-
46711 and in Criminal Case No. Q-93-46713, respectively. Accordingly, after applying the
provisions of the Indeterminate Sentence Law and P.D. No. 818, said accused is hereby
sentenced to suffer the indeterminate penalty of ten (10) years and one (1) day to twelve (12)
years of prision mayor, as minimum, to twenty (20) years of reclusion temporal, as maximum, in
Criminal Case No. Q-93-46711 and of ten (10) years and one (1) day to twelve (12) years of
prision mayor, as minimum, to thirty (30) years of reclusion perpetua, as maximum, in Criminal
Case No. Q-93-46713.

Likewise, said accused is hereby found GUILTY beyond reasonable doubt of Violation of B.P. 22
as charged in the Informations in Criminal Case No. Q-93-46712 and in Criminal Case No. Q-93-
46714 and is accordingly sentenced to imprisonment of one (1) year for each of the said offense
and to pay a fine in the total amount of P333,373.96, with subsidiary imprisonment in case of
insolvency.

FINALLY, judgment is hereby rendered in favor of private complainant, W. L. Food Products,


herein represented by Rodolfo Borjal, and against herein accused JOHN JERRY DY ALDEN
(JOHN DY), ordering the latter to pay to the former the total sum of P333,373.96 plus interest
thereon at the rate of 12% per annum from September 28, 1992 until fully paid; and, (2) the costs
of this suit.

SO ORDERED.[9]

Dy brought the case to the Court of Appeals. In the assailed Decision of January 23, 2003, the
appellate court affirmed the RTC. It, however, modified the sentence and deleted the payment
of interests in this wise:

WHEREFORE, in view of the foregoing, the decision appealed from is hereby AFFIRMED with
MODIFICATION. In Criminal Case No. Q-93-46711 (for estafa), the accused-appellant JOHN
JERRY DY ALDEN (JOHN DY) is hereby sentenced to suffer an indeterminate penalty of
imprisonment ranging from six (6) years and one (1) day of prision mayor as minimum to twenty
(20) years of reclusion temporal as maximum plus eight (8) years in excess of [P]22,000.00. In
Criminal Case No. Q-93-46712 (for violation of BP 22), accused-appellant is sentenced to suffer
an imprisonment of one (1) year and to indemnify W.L. Food Products, represented by Rodolfo
Borjal, the amount of ONE HUNDRED SIX THOUSAND FIVE HUNDRED SEVENTY NINE PESOS
and 60/100 ([P]106,579.60). In Criminal Case No. Q-93-46713 (for estafa), accused-appellant is
hereby sentenced to suffer an indeterminate penalty of imprisonment ranging from eight (8)
years and one (1) day of prision mayor as minimum to thirty (30) years as maximum. Finally, in
Criminal Case No. Q-93-46714 (for violation of BP 22), accused-appellant is sentenced to suffer
an imprisonment of one (1) year and to indemnify W.L. Food Products, represented by Rodolfo
Borjal, the amount of TWO HUNDRED TWENTY SIX THOUSAND SEVEN HUNDRED NINETY
FOUR PESOS AND 36/100 ([P]226,794.36).

SO ORDERED.[10]

Dy moved for reconsideration, but his motion was denied in the Resolution dated May 14, 2003.

Hence, this petition which raises the following issues:

I.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING


THAT THE PROSECUTION HAS PROVEN THE GUILT OF ACCUSED BEYOND REASONABLE
DOUBT OF ESTAFA ON TWO (2) COUNTS?

II.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FINDING


THAT THE PROSECUTION HAS PROVEN THE GUILT OF ACCUSED BEYOND REASONABLE
DOUBT OF VIOLATION OF BP 22 ON TWO (2) COUNTS?

III.

WHETHER OR NOT THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN AWARDING


DAMAGES TO PRIVATE COMPLAINANT, W.L. FOOD PRODUCTS, THE TOTAL SUM OF
[P]333,373.96?[11]

Essentially, the issue is whether John Dy is liable for estafa and for violation of B.P. Blg. 22.

First, is petitioner guilty of estafa?

Mainly, petitioner contends that the checks were ineffectively issued. He stresses that not only
were the checks blank, but also that W.L. Foods accountant had no authority to fill the amounts.
Dy also claims failure of consideration to negate any obligation to W.L. Foods. Ultimately,
petitioner denies having deceived Lim inasmuch as only the two checks bounced since he began
dealing with him. He maintains that it was his long established business relationship with Lim that
enabled him to obtain the goods, and not the checks issued in payment for them. Petitioner
renounces personal liability on the checks since he was absent when the goods were delivered.

The Office of the Solicitor General (OSG), for the State, avers that the delivery of the checks by
Dys driver to Maraca, constituted valid issuance. The OSG sustains Ongs prima facie authority to
fill the checks based on the value of goods taken. It observes that nothing in the records showed
that W.L. Foods accountant filled up the checks in violation of Dys instructions or their previous
agreement. Finally, the OSG challenges the present petition as an inappropriate remedy to
review the factual findings of the trial court.

We find that the petition is partly meritorious.

Before an accused can be held liable for estafa under Article 315, paragraph 2(d) of the Revised
Penal Code, as amended by Republic Act No. 4885,[12] the following elements must concur: (1)
postdating or issuance of a check in payment of an obligation contracted at the time the check
was issued; (2) insufficiency of funds to cover the check; and (3) damage to the payee thereof.[13]
These elements are present in the instant case.

Section 191 of the Negotiable Instruments Law[14] defines issue as the first delivery of an
instrument, complete in form, to a person who takes it as a holder. Significantly, delivery is the
final act essential to the negotiability of an instrument. Delivery denotes physical transfer of the
instrument by the maker or drawer coupled with an intention to convey title to the payee and
recognize him as a holder.[15] It means more than handing over to another; it imports such
transfer of the instrument to another as to enable the latter to hold it for himself.[16]

In this case, even if the checks were given to W.L. Foods in blank, this alone did not make its
issuance invalid. When the checks were delivered to Lim, through his employee, he became a
holder with prima facie authority to fill the blanks. This was, in fact, accomplished by Lims
accountant.

The pertinent provisions of Section 14 of the Negotiable Instruments Law are instructive:

SEC. 14. Blanks; when may be filled.Where the instrument is wanting in any material particular,
the person in possession thereof has a prima facie authority to complete it by filling up the blanks
therein. And a signature on a blank paper delivered by the person making the signature in order
that the paper may be converted into a negotiable instrument operates as a prima facie authority
to fill it up as such for any amount. . (Emphasis supplied.)

Hence, the law merely requires that the instrument be in the possession of a person other than
the drawer or maker. From such possession, together with the fact that the instrument is wanting
in a material particular, the law presumes agency to fill up the blanks.[17] Because of this, the
burden of proving want of authority or that the authority granted was exceeded, is placed on the
person questioning such authority.[18] Petitioner failed to fulfill this requirement.

Next, petitioner claims failure of consideration. Nevertheless, in a letter[19] dated November 10,
1992, he expressed willingness to pay W.L. Foods, or to replace the dishonored checks. This was
a clear acknowledgment of receipt of the goods, which gave rise to his duty to maintain or
deposit sufficient funds to cover the amount of the checks.

More significantly, we are not swayed by petitioners arguments that the single incident of
dishonor and his absence when the checks were delivered belie fraud. Indeed damage and deceit
are essential elements of the offense and must be established with satisfactory proof to warrant
conviction.[20] Deceit as an element of estafa is a specie of fraud. It is actual fraud which consists
in any misrepresentation or contrivance where a person deludes another, to his hurt. There is
deceit when one is misled -- by guile, trickery or by other means -- to believe as true what is
really false.[21]

Prima facie evidence of deceit was established against petitioner with regard to FEBTC Check
No. 553615 which was dishonored for insufficiency of funds. The letter[22] of petitioners counsel
dated November 10, 1992 shows beyond reasonable doubt that petitioner received notice of the
dishonor of the said check for insufficiency of funds. Petitioner, however, failed to deposit the
amounts necessary to cover his check within three banking days from receipt of the notice of
dishonor. Hence, as provided for by law,[23] the presence of deceit was sufficiently proven.

Petitioner failed to overcome the said proof of deceit. The trial court found no pre-existing
obligation between the parties. The existence of prior transactions between Lim and Dy alone
did not rule out deceit because each transaction was separate, and had a different consideration
from the others. Even as petitioner was absent when the goods were delivered, by the principle
of agency, delivery of the checks by his driver was deemed as his act as the employer. The
evidence shows that as a matter of course, Dy, or his employee, would pay W.L. Foods in either
cash or check upon pick up of the stocks of snack foods at the latters branch or main office.
Despite their two-year standing business relations prior to the issuance of the subject check, W.L
Foods employees would not have parted with the stocks were it not for the simultaneous
delivery of the check issued by petitioner.[24] Aside from the existing business relations between
petitioner and W.L. Foods, the primary inducement for the latter to part with its stocks of snack
foods was the issuance of the check in payment of the value of the said stocks.

In a number of cases,[25] the Court has considered good faith as a defense to a charge of estafa
by postdating a check. This good faith may be manifested by making arrangements for payment
with the creditor and exerting best efforts to make good the value of the checks. In the instant
case petitioner presented no proof of good faith. Noticeably absent from the records is sufficient
proof of sincere and best efforts on the part of petitioner for the payment of the value of the
check that would constitute good faith and negate deceit.

With the foregoing circumstances established, we find petitioner guilty of estafa with regard to
FEBTC Check No. 553615 for P226,794.36.

The same, however, does not hold true with respect to FEBTC Check No. 553602 for
P106,579.60. This check was dishonored for the reason that it was drawn against uncollected
deposit. Petitioner had P160,659.39 in his savings deposit account ledger as of July 22, 1992. We
disagree with the conclusion of the RTC that since the balance included a regional clearing check
worth P55,000 deposited on July 20, 1992, which cleared only five (5) days later, then petitioner
had inadequate funds in this instance. Since petitioner technically and retroactively had sufficient
funds at the time Check No. 553602 was presented for payment then the second element
(insufficiency of funds to cover the check) of the crime is absent. Also there is no prima facie
evidence of deceit in this instance because the check was not dishonored for lack or insufficiency
of funds. Uncollected deposits are not the same as insufficient funds. The prima facie
presumption of deceit arises only when a check has been dishonored for lack or insufficiency of
funds. Notably, the law speaks of insufficiency of funds but not of uncollected deposits.
Jurisprudence teaches that criminal laws are strictly construed against the Government and
liberally in favor of the accused.[26] Hence, in the instant case, the law cannot be interpreted or
applied in such a way as to expand its provision to encompass the situation of uncollected
deposits because it would make the law more onerous on the part of the accused.

Clearly, the estafa punished under Article 315, paragraph 2(d) of the Revised Penal Code is
committed when a check is dishonored for being drawn against insufficient funds or closed
account, and not against uncollected deposit.[27] Corollarily, the issuer of the check is not liable
for estafa if the remaining balance and the uncollected deposit, which was duly collected, could
satisfy the amount of the check when presented for payment.

Second, did petitioner violate B.P. Blg. 22?

Petitioner argues that the blank checks were not valid orders for the bank to pay the holder of
such checks. He reiterates lack of knowledge of the insufficiency of funds and reasons that the
checks could not have been issued to apply on account or for value as he did not obtain delivery
of the goods.

The OSG maintains that the guilt of petitioner has been proven beyond reasonable doubt. It cites
pieces of evidence that point to Dys culpability: Maracas acknowledgment that the checks were
issued to W.L. Foods as consideration for the snacks; Lims testimony proving that Dy received a
copy of the demand letter; the bank managers confirmation that petitioner had insufficient
balance to cover the checks; and Dys failure to settle his obligation within five (5) days from
dishonor of the checks.

Once again, we find the petition to be meritorious in part.

The elements of the offense penalized under B.P. Blg. 22 are as follows: (1) the making, drawing
and issuance of any check to apply to account or for value; (2) the knowledge of the maker,
drawer or issuer that at the time of issue he does not have sufficient funds in or credit with the
drawee bank for the payment of such check in full upon its presentment; and (3) subsequent
dishonor of the check by the drawee bank for insufficiency of funds or credit or dishonor for the
same reason had not the drawer, without any valid cause, ordered the bank to stop payment.[28]
The case at bar satisfies all these elements.

During the joint pre-trial conference of this case, Dy admitted that he issued the checks, and that
the signatures appearing on them were his.[29] The facts reveal that the checks were issued in
blank because of the uncertainty of the volume of products to be retrieved, the discount that can
be availed of, and the deduction for bad orders. Nevertheless, we must stress that what the law
punishes is simply the issuance of a bouncing check and not the purpose for which it was issued
nor the terms and conditions relating thereto.[30] If inquiry into the reason for which the checks
are issued, or the terms and conditions of their issuance is required, the publics faith in the
stability and commercial value of checks as currency substitutes will certainly erode.[31]

Moreover, the gravamen of the offense under B.P. Blg. 22 is the act of making or issuing a
worthless check or a check that is dishonored upon presentment for payment. The act effectively
declares the offense to be one of malum prohibitum. The only valid query, then, is whether the
law has been breached, i.e., by the mere act of issuing a bad check, without so much regard as to
the criminal intent of the issuer.[32] Indeed, non-fulfillment of the obligation is immaterial. Thus,
petitioners defense of failure of consideration must likewise fall. This is especially so since as
stated above, Dy has acknowledged receipt of the goods.

On the second element, petitioner disputes notice of insufficiency of funds on the basis of the
check being issued in blank. He relies on Dingle v. Intermediate Appellate Court[33] and Lao v.
Court of Appeals[34] as his authorities. In both actions, however, the accused were co-
signatories, who were neither apprised of the particular transactions on which the blank checks
were issued, nor given notice of their dishonor. In the latter case, Lao signed the checks without
knowledge of the insufficiency of funds, knowledge she was not expected or obliged to possess
under the organizational structure of the corporation.[35] Lao was only a minor employee who
had nothing to do with the issuance, funding and delivery of checks.[36] In contrast, petitioner
was the proprietor of Dyna Marketing and the sole signatory of the checks who received notice
of their dishonor.

Significantly, under Section 2[37] of B.P. Blg. 22, petitioner was prima facie presumed to know of
the inadequacy of his funds with the bank when he did not pay the value of the goods or make
arrangements for their payment in full within five (5) banking days upon notice. His letter dated
November 10, 1992 to Lim fortified such presumption.

Undoubtedly, Dy violated B.P. Blg. 22 for issuing FEBTC Check No. 553615. When said check
was dishonored for insufficient funds and stop payment order, petitioner did not pay or make
arrangements with the bank for its payment in full within five (5) banking days.

Petitioner should be exonerated, however, for issuing FEBTC Check No. 553602, which was
dishonored for the reason DAUD or drawn against uncollected deposit. When the check was
presented for payment, it was dishonored by the bank because the check deposit made by
petitioner, which would make petitioners bank account balance more than enough to cover the
face value of the subject check, had not been collected by the bank.

In Tan v. People,[38] this Court acquitted the petitioner therein who was indicted under B.P. Blg.
22, upon a check which was dishonored for the reason DAUD, among others. We observed that:

In the second place, even without relying on the credit line, petitioners bank account covered the
check she issued because even though there were some deposits that were still uncollected the
deposits became good and the bank certified that the check was funded.[39]

To be liable under Section 1[40] of B.P. Blg. 22, the check must be dishonored by the drawee
bank for insufficiency of funds or credit or dishonored for the same reason had not the drawer,
without any valid cause, ordered the bank to stop payment.

In the instant case, even though the check which petitioner deposited on July 20, 1992 became
good only five (5) days later, he was considered by the bank to retroactively have had
P160,659.39 in his account on July 22, 1992. This was more than enough to cover the check he
issued to respondent in the amount of P106,579.60. Under the circumstance obtaining in this
case, we find the petitioner had issued the check, with full ability to abide by his commitment[41]
to pay his purchases.

Significantly, like Article 315 of the Revised Penal Code, B.P. Blg. 22 also speaks only of
insufficiency of funds and does not treat of uncollected deposits. To repeat, we cannot interpret
the law in such a way as to expand its provision to encompass the situation of uncollected
deposits because it would make the law more onerous on the part of the accused. Again, criminal
statutes are strictly construed against the Government and liberally in favor of the accused.[42]

As regards petitioners civil liability, this Court has previously ruled that an accused may be held
civilly liable where the facts established by the evidence so warrant.[43] The rationale for this is
simple. The criminal and civil liabilities of an accused are separate and distinct from each other.
One is meant to punish the offender while the other is intended to repair the damage suffered
by the aggrieved party. So, for the purpose of indemnifying the latter, the offense need not be
proved beyond reasonable doubt but only by preponderance of evidence.[44]

We therefore sustain the appellate courts award of damages to W.L. Foods in the total amount
of P333,373.96, representing the sum of the checks petitioner issued for goods admittedly
delivered to his company.

As to the appropriate penalty, petitioner was charged with estafa under Article 315, paragraph
2(d) of the Revised Penal Code, as amended by Presidential Decree No. 818[45] (P.D. No. 818).

Under Section 1[46] of P.D. No. 818, if the amount of the fraud exceeds P22,000, the penalty of
reclusin temporal is imposed in its maximum period, adding one year for each additional P10,000
but the total penalty shall not exceed thirty (30) years, which shall be termed reclusin
perpetua.[47] Reclusin perpetua is not the prescribed penalty for the offense, but merely
describes the penalty actually imposed on account of the amount of the fraud involved.

WHEREFORE, the petition is PARTLY GRANTED. John Dy is hereby ACQUITTED in Criminal


Case No. Q-93-46711 for estafa, and Criminal Case No. Q-93-46712 for violation of B.P. Blg. 22,
but he is ORDERED to pay W.L. Foods the amount of P106,579.60 for goods delivered to his
company.

In Criminal Case No. Q-93-46713 for estafa, the Decision of the Court of Appeals is AFFIRMED
with MODIFICATION. Petitioner is sentenced to suffer an indeterminate penalty of twelve (12)
years of prisin mayor, as minimum, to thirty (30) years of reclusin perpetua, as maximum.

In Criminal Case No. Q-93-46714 for violation of B.P. Blg. 22, the Decision of the Court of
Appeals is AFFIRMED, and John Dy is hereby sentenced to one (1) year imprisonment and
ordered to indemnify W.L. Foods in the amount of P226,794.36.
SO ORDERED.

G.R. No. 216467


PILIPINAS SHELL PETROLEUM CORPORATION, Petitioner
vs.
CARLOS* DUQUE & TERESA DUQUE, Respondents
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari seeking the reversal and setting aside of
the Decision1 and Resolution2 of the Court of Appeals (CA), dated August 18, 2014 and January
14, 2015, respectively, in CA-G.R. SP No. 124925. The assailed Decision reversed and set aside
the March 23, 2012 Order of the Regional Trial Court (RTC) of Makati City, which revived its
March 16, 2011 Decision in Criminal Case No. 10-1757, while the questioned CA Resolution
denied petitioner's Motion for Reconsideration.
The pertinent factual and procedural antecedents of the case are as follows:
The instant petition arose from an Information for violation of Batas Pambansa Big. 22 (BP 22)
filed with the Metropolitan Trial Court (MeTC) of Makati City against herein respondents. The
Information reads as follows:
That on or about the 16th day of November 2001, in the City of Makati, Metro Manila,
Philippines, a place within the jurisdiction of this Honorable Court, the above-named accused
being then the authorized signatories of FITNESS CONSULTANTS INC. did then and there
wilfully, unlawfully and feloniously make out, draw and issue to PILIPINAS SHELL PETROLEUM
CORP., to apply on account or for value the check described below:
Check No. : 6000012386

Drawn Against : International Exchange Bank

In the amount of : ₱105,518.55

Postdated/Dated : November 16, 2001

Payable to : Pilipinas Shell Corporation

said accused well knowing that at the time of issue thereof, said accused did not have sufficient
funds in or credit with the drawee bank for the payment in full of the face amount of such check
upon its presentment which check when presented for payment within reasonable time from
date thereof, was subsequently dishonored by the drawee bank for the reason "ACCOUNT
CLOSED" and despite receipt of notice of such dishonor, the said accused failed to pay said
payee the face amount of said check or to make arrangement for full payment thereof within five
(5) banking days after receiving notice.
CONTRARY TO LAW.3
It appears from the records at hand that herein petitioner Pilipinas Shell Petroleum Corporation
(PSPC) is a lessee of a building known as Shell House at 156 Valero Street, Salcedo Village,
Makati City. On August 23, 2000, PSPC subleased a 500-meter portion of the 2nct Floor of the
Shell Building to the The Fitness Center (TFC).4 Thereafter, TFC encountered problems in its
business operations. Thus, with the conformity of PSPC, TFC assigned to Fitness Consultants, Inc,
(FCI) all its rights and obligations under the contract of sublease executed by PSPC in its
favor.5Respondent Carlos Duque is the proprietor, while respondent Teresa Duque is the
corporate secretary of FCI. Subsequently, FCI failed to pay its rentals to PSPC. FCI subsequently
issued a check, with respondents as signatories, which would supposedly cover FCI's obligations
to PSPC. However, the check was dishonored, thus, leading to the filing of a criminal complaint
against respondents for their alleged violation of BP 22.
The parties then went to trial, which subsequently resulted in a verdict finding herein
respondents guilty as charged. The dispositive portion of the Decision of the MeTC of Makati
City, Branch 66, dated May 17, 2010, reads thus:
WHEREFORE, in view of the foregoing, the prosecution having proven the guilt of the accused
beyond reasonable doubt, the Court renders judgment finding accused Carlo Duque and Teresa
Duque GUILTY of the offense of Violation of B.P. 22 and hereby sentences them to pay a FINE of
₱105,516.55 with subsidiary imprisonment in case of insolvency. Both accused are further
ordered to civilly indemnify the private complainant Pilipinas Shell Petroleum Corporation (PSPC)
the amount of ₱105,516.55 with interest of 12% per annum from the time the complaint was filed
on October 4, 2002 until the amount is fully paid, attorney's fees of ₱50,000.00 and to pay the
costs.
SO ORDERED.6
Respondents appealed the above MeTC Decision with the RTC of Makati.
On March 16, 2011, the RTC of Makati City, Branch 143, rendered judgment acquitting
respondents and disposing the case as follows:
WHEREFORE, premised considered, the [MeTC] Decision dated May 17, 2010 is modified as
follows:
The Court hereby renders judgment ACQUITTING the accused CARLO DUQUE and TERESA
DUQUE of violation of B.P. Blg. 22. However, the Court maintains the court a quo 's finding in
ordering the accused to pay the complainant Pilipinas Shell Petroleum Corporation (PSC) the
amount of One Hundred Five Thousand Five Hundred Sixteen Pesos and Fifty Five Centavos
(Php105,516.55) as civil indemnity with interest of 12% per annum from the time the complaint
was filed on 04 October 2002 until the amount is fully paid, attorney's fees of Fifty Thousand
Pesos (Php50,000.00) and to pay the costs.
SO ORDERED.7
Respondents filed a Motion for Partial Reconsideration8 of the RTC Decision contending that they
could not be held civilly liable because their acquittal was due to the failure of the prosecution to
establish the elements of the offense charged. In addition, they assert that they, being corporate
officers, may not be held personally and civilly liable for the debts of the corporation they
represent, considering that they had been acquitted of criminal liability.
In an Order9 dated September 2, 2011, the RTC found merit in respondents' Motion for Partial
Reconsideration. The RTC ruled, in essence, that respondents may not be held civilly liable for
the value of the subject check because they have not been convicted of the offense with which
they had been charged. In addition, the RTC found that the check was drawn against the current
account of FCI and the obligations sought to be paid were corporate debts and, as such, FCI, not
respondents, should be held civilly liable. The RTC likewise held that the veil of corporate fiction
was not used as cloak for fraud as there was no evidence that respondents agreed to be
personally liable for the corporation's obligations.
PSPC filed a Motion for Reconsideration10 citing the rule that the extinction of the penal action
does not carry with it the extinction of the civil action and alleging that the RTC erred in ruling
that respondents may not be held liable for the obligations of FCI on the ground that there was
no basis to pierce the corporate veil.
On March 23, 2012, the RTC issued an Order11 granting PSPC's motion for reconsideration, thus,
reviving the RTC Decision of March 16, 2011. The RTC ruled that respondents' acquittal, the
same having been based on the prosecution's failure to prove all the elements of the offense
charged, did not include the extinguishment of their civil liability. Citing Section 1 of BP 22, the
RTC held that the person who actually signed the corporate check shall be held liable, without
any condition, qualification or limitation. The RTC also found that the records show that FCI,
through respondents, was civilly liable to PSPC.
Aggrieved by the March 23, 2012 Order of the RTC, respondents filed a petition for review with
the CA contending that the RTC erred in holding them liable for the civil liability of FCI even if
they were acquitted of the crime of violating BP 22.12
In its assailed Decision, the CA ruled in favor of respondents and disposed of the case as follows:
WHEREFORE, the petition is GRANTED and the assailed 23 March 2012 RTC decision is
REVERSED and SET ASIDE. The Order dated 2 September 2011 is REINSTATED.
IT IS SO ORDERED.13
The CA basically held that, upon acquittal, the civil liability of a corporate officer in a BP 22 case
is extinguished with the criminal liability, without prejudice to an independent civil action which
may be pursued against the corporation.
Petitioner filed a motion for reconsideration, but the CA denied it in its Resolution dated January
14, 2015.
Hence, the present petition for review on certiorari based on the following arguments:
A.
THE COURT OF APPEALS GRAVELY ERRED IN ABSOLVING RESPONDENTS FROM CIVIL
LIABILITY ARISING FROM THEIR VIOLATION OF BATAS PAMBANSA BLG. 22 DUE TO THEIR
ACQUITTAL FROM THE SAID CRIME, SINCE THE ORDER THAT DECREED THEIR ACQUITTAL
DID NOT MAKE AN EXPRESS MENTION THAT THE FACTS FROM WHICH THEIR CIVIL
LIABILITY MAY ARISE DID NOT EXIST.
B.
THE COURT OF APPEALS GRAVELY ERRED IN RELYING ON GOSIACO V. CHING IN RULING
THAT RESPONDENTS ARE ABSOLVED FROM CIVIL LIABILITY
C.
THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE CIVIL OBLIGATION
COVERED BY THE DISHONORED CHECKS WERE CORPORATE DEBTS FOR WHICH ONLY FCI
SHOULD BE HELD LIABLE.14
The petition lacks merit.
The only issue in the present case is whether or not respondents, as corporate officers, may still
be held civilly liable despite their acquittal from the criminal charge of violation of BP 22.
The Court rules in the negative, as this matter has already been settled by jurisprudence. In the
case of Gosiaco v. Ching,15 this Court enunciated the rule that a corporate officer who issues a
bouncing corporate check can only be held civilly liable when he is convicted.1âwphi1 In the said
case, the Court ruled that:
When a corporate officer issues a worthless check in the corporate name he may be held
personally liable for violating a penal statute.1avvphi1 The statute imposes criminal penalties on
anyone who with intent to defraud another of money or property, draws or issues a check on any
bank with knowledge that he has no sufficient funds in such bank to meet the check on
presentment. Moreover, the personal liability of the corporate officer is predicated on the
principle that he cannot shield himself from liability from his own acts on the ground that it was a
corporate act and not his personal act.16
The Court, citing the case of Bautista v. Auto Plus Traders, Incorporated, et. al.,17 nonetheless
categorically held that the civil liability of a corporate officer in a BP 22 case is extinguished with
the criminal liability."18
The above rule is reiterated in the recent case of Navarra v. People, et al.,19 where the petitioner,
the Chief Finance Officer of a corporation, who was the signatory of the dishonored corporate
checks, was convicted of the offense of violation of BP 22 and was ordered to pay the private
complainant civil indemnity in an amount equivalent to the value of the checks which bounced.
The Court held thus:
The general rule is that a corporate officer who issues a bouncing corporate check can be held
civilly liable when he is convicted. The criminal liability of the person who issued the bouncing
checks in behalf of a corporation stands independent of the civil liability of the corporation itself,
such civil liability arising from the Civil Code. But BP 22 itself fused this criminal liability with the
corresponding civil liability of the corporation itself by allowing the complainant to recover such
civil liability, not from the corporation, but from the person who signed the check in its behalf.20
As held above, it is clear that the civil liability of the corporate officer for the issuance of a
bouncing corporate check attaches only if he is convicted. Conversely, therefore, it will follow
that once acquitted of the offense of violating BP 22, a corporate officer is discharged from any
civil liability arising from the issuance of the worthless check in the name of the corporation he
represents. This is without regard as to whether his acquittal was based on reasonable doubt or
that there was a pronouncement by the trial court that the act or omission from which the civil
liability might arise did not exist.
Moreover, in the present case, nothing in the records at hand would show that respondents
made themselves personally nor solidarily liable for the corporate obligations either as
accommodation parties or sureties. On the contrary, there is no dispute that respondents signed
the subject check in their capacity as corporate officers and that the check was drawn in the
name of FCI as payment for the obligation of the corporation and not for the personal
indebtedness of respondents. Neither is there allegation nor proof that the veil of corporate
fiction is being used by respondents for fraudulent purposes. The rule is that juridical entities
have personalities separate and distinct from its officers and the persons composing it.21
Generally, the stockholders and officers are not personally liable for the obligations of the
corporation except only when the veil of corporate fiction is being used as a cloak or cover for
fraud or illegality, or to work injustice,22 which is not the case here. Hence, respondents cannot
be held liable for the value of the checks issued in payment for FCI's obligation.
The cases of Mitra v. People, et al.23 and Llamado v. Court of Appeals, et. al.,24 which were cited
by petitioner, may not be made as bases to rule against respondents because the accused in the
said cases were found guilty of violating BP 22. Thus, the general rule that a corporate officer
who issues a bouncing corporate check can be held civilly liable when convicted, applies to them.
In the present case, however, respondents were acquitted of the offense charged. As such,
consistent with the rule established in Bautista and Gosiaco, respondents' civil liability was
extinguished with their criminal liability. In the same manner, the Court agrees with the CA that
the case of Alferez v. People, et al.25 is neither applicable to the present case on the ground that,
while Alferez was acquitted from the charge of violation of BP 22, the checks which bounced
were issued by Alferez in his personal capacity and in payment of his personal obligations.
WHEREFORE, the instant petition is DENIED. The Decision and Resolution of the Court of
Appeals, dated August 18, 2014 and January 14, 2015, respectively, in CA-G.R. SP No. 124925
are AFFIRMED.
SO ORDERED.

G.R. No. 205972


CATERPILLAR, INC., Petitioner
vs.
MANOLO P. SAMSON, Respondent
x-----------------------x
G.R. No. 164352
CATERPILLAR, INC., Petitioner,
vs.
MANOLO P. SAMSON, Respondent.
DECISION
BERSAMIN, J.:
The determination of probable cause to charge a person in court for a criminal offense is
exclusively lodged in the Executive Branch of the Government, through the Department of
Justice. Initially, the determination is done by the investigating public prosecutor, and on review
by the Secretary of Justice or his duly authorized subordinate. The courts will respect the
determination, unless the same shall be shown to have been made in grave abuse of discretion
amounting to lack or excess of jurisdiction.
The Cases
Before us are the consolidated cases of G.R. No. 2059721 and G.R. No. 164352.2
G.R. No. 164352 involves the appeal by petition for review on certiorari of Caterpillar, Inc.
(Caterpillar) to reverse the decision promulgated on January 21, 20043 by the Court of Appeals
(CA) in CA-G.R. SP No. 75526, and the resolution promulgated on June 30, 2004 denying the
motion for reconsideration thereof.4
G.R. No. 205972 relates to the appeal brought by Caterpillar to assail the decision and resolution
promulgated in CA-G.R. SP No. 102316 respectively on May 8, 20125 and February 12, 2013,6
whereby the CA affirmed the resolutions of the Department of Justice (DOJ) finding that there
was no probable cause to indict Manolo P. Samson (Samson) for unfair competition.
Antecedents
Caterpillar is a foreign corporation engaged in the manufacture and distribution of footwear,
clothing and related items, among others. Its products are known for six core trademarks,
namely, "CATERPILLAR", "CAT" "CATERPILLAR & DESIGN" "CAT AND DESIGN", "WALKING
MACHINES" and "TRACK-TYPE TRACTOR & DESIGN (Core Marks),7 all of which are alleged as
internationally known. On the other hand, Samson, doing business under the names and styles of
Itti Shoes Corporation, Kolm's Manufacturing Corporation and Caterpillar Boutique and General
Merchandise, is the proprietor of various retail outlets in the Philippines selling footwear, bags,
clothing, and related items under the trademark "CATERPILLAR", registered in 1997 under
Trademark Registration No. 64705 issued by the Intellectual Property Office (IPO).8
G.R. No. 164352
On July 26, 2000, upon application of the National Bureau of Investigation (NBI), the Regional
Trial Court (RTC), Branch 56, in Makati City issued Search Warrants Nos. 00-022 to 00-032,
inclusive, all for unfair competition,9 to search the establishments owned, controlled and
operated by Samson. The implementation of the search warrants on July 27, 2000 led to the
seizure of various products bearing Caterpillar's Core Marks.
Caterpillar filed against Samson several criminal complaints for unfair competition in the
Department of Justice (DOJ), docketed as LS. Nos. 2000-13 54 to 2000-13 64, inclusive.
Additionally, on July 31, 2000, Caterpillar commenced a civil action against Samson and his
business entities, with the IPO as a nominal party10 - for Unfair Competition, Damages and
Cancellation of Trademark with Application for Temporary Restraining Order (TRO) and/or Writ
of Preliminary Injunction - docketed as Civil Case No. Q-00-41446 of the RTC in Quezon City. In
said civil action, the RTC denied Caterpillar's application for the issuance of the TRO on August
17, 2000.
The DOJ, through Senior State Prosecutor Jude R. Romano, issued a joint resolution dated
November 15, 200111recommending that Samson be criminally charged with unfair competition
under Section 168.3 (a),12 in relation to Section 123.l(e),13 Section 131.114 and Section 170,15 all of
Republic Act No. 8293, or the Intellectual Property Code of the Philippines (IP Code).
However, because Samson and his affiliate companies allegedly continued to sell and distribute
products clothed with the general appearance of its own products, Caterpillar again applied for
another set of search warrants against Samson and his businesses. The RTC, Branch 172, in
Valenzuela City issued Search Warrants Nos. 12-V-00,16 13-V-00,17 20-V-0018 and 29-V-0019 upon
application of the NBI, by virtue of the implementation of which several goods were seized and
confiscated by the NBI agents.
As a consequence, Caterpillar filed 26 criminal complaints for unfair competition on January 31,
2001, docketed as LS. Nos. 2001-42 to 2001-67, against Samson and/or the occupants of his
affiliate entities before the DOJ.20 In due course, the DOJ, through State Prosecutor Zenaida M.
Lim, issued a joint resolution dated September 28, 200121recommending the filing of criminal
complaints for unfair competition under Section 168.3(a), in relation to Section 123 .1, Section
131.1 and Section 170 of the IP Code. Accordingly, six criminal complaints were filed in the RTC,
Branch 256, in Muntinlupa City, presided by Judge Alberto L. Lerma, docketed as Criminal Cases
Nos. 02-238 to 02-243.
On January 17 and 22, 2002, Samson filed a petitions for review with the Office of the Secretary
of Justice to appeal the joint resolutions in LS. Nos. 2000-1354 to 2000-136422 and LS. Nos. 2001-
042 to 2001-067.23
On May 30, 2002, Samson filed a Motion to Suspend Arraignment in Criminal Cases Nos. 02-238
to 243,24 citing the following as grounds:25
I.
THERE EXISTS PREJUDICIAL QUESTIONS PENDING LITIGATION BEFORE THE REGIONAL
TRIAL COURT OF QUEZON CITY, BRANCH 90, IN CIVIL CASE NO. Q-00-41446 ENTITLED:
"CATERPILLAR, INC., ET AL. VS. ITTI SHOES CORPORATION, ET AL.," THE FINAL
RESOLUTIONS OF WHICH WILL DETERMINE THE OUTCOME OF THE INSTANT CRIMINAL
CASES.
II.
ACCUSED HAS FILED PETITIONS FOR REVIEW WITH THE DEPARTMENT OF JUSTICE
ASSAILING THE RESOLUTIONS OF THE CHIEF STATE PROSECUTOR WHO CAUSED THE
FILING OF THE INSTANT CASES AND ARE STILL PENDING THEREIN UP TO THE PRESENT.
In the meanwhile, on July 10, 2002, the DOJ, through Secretary Hernando B. Perez, issued a
resolution26 denying Samson's petition for review in I.S. Nos. 2000-1354 to 2000-1364. Samson's
motion for reconsideration was likewise denied on May 26, 2003.
On September 23, 2002, Presiding Judge Lerma of the RTC granted Samson's Motion to
Suspend Arraignment, and suspended the arraignment and all other proceedings in Criminal
Cases Nos. 02-240 to 02-243 until Civil Case No. Q-00-41446 was finally resolved,27 holding:
After a careful scrutiny of the case, this Court finds that private complainant, in Civil Case No. Q-
00-41446, seeks for the cancellation of the trademark "CATERPILLAR" which is registered in the
name of the accused and to prevent the latter from using the said trademark ("CATERPILLAR"),
while the issue in the instant case is the alleged unlawful use by the accused of the trademark
"CATERPILLAR" which is claimed to be owned by the private complainant. From the foregoing,
this Court believes that there exists a prejudicial question since the determination of who is really
the lawful or registered user of the trademark "CATERPILLAR" will ultimately determine whether
or not the instant criminal action shall proceed. Clearly, the issues raised in Civil Case No. Q-00-
41446 is similar or intimately related to the issue in the case at bar for if the civil case will be
resolved sustaining the trademark registration of the accused for the trademark CATERPILLAR,
then the latter would have all the authority to continue the use of the said trademark as a
consequence of a valid registration, and by reason of which there may be no more basis to
proceed with the instant criminal action.28
After the RTC denied its motion for reconsideration29 on December 5, 2002,30 Caterpillar
elevated the matter to the CA by petition for certiorari on February 14, 2003,31 docketed as C.A.-
G.R. SP No. 75526 entitled Caterpillar, Inc. v. Hon. Alberto L. Lerma, in his capacity as Presiding
Judge of Branch 256 of the Regional Trial Court, Muntinlupa City, and Manolo P. Samson,
alleging grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the
RTC in suspending the arraignment and other proceedings in Criminal Cases Nos. 02-238 to 02-
243 on the ground of the existence of an alleged prejudicial question in Civil Case No. Q-00-
41446 then pending in the RTC in Quezon City whose resolution would determine the outcome
of the criminal cases.
Meanwhile, on January 13, 2003, Acting Justice Secretary Ma. Merceditas N. Gutierrez reversed
and set aside the resolution issued by State Prosecutor Lim in I.S. No. 2001-042 to 2001-067, and
directed the Chief State Prosecutor to cause the withdrawal of the criminal informations filed
against Samson in court,32 disposing as follows:
ACCORDINGLY, the assailed joint resolution is hereby REVERSED and SET ASIDE. The Chief
State Prosecutor is directed to forthwith cause the withdrawal of the informations filed in court
against respondent Manolo P. Samson and to report action taken hereon within ten (10) days
from receipts hereof.33
Acting Justice Secretary Gutierrez based her resolution on the order dated June 26, 2001,
whereby the RTC of Valenzuela City, Branch 172, had quashed the 26 search warrants upon
motion of Samson.34 Consequently, the goods seized and confiscated by virtue of the quashed
search warrants could no longer be admitted in evidence
Correspondingly, Presiding Judge Lerma of the RTC ordered the withdrawal of Criminal Cases
Nos. 02-240 to 02-243 on February 4, 2003.35
Aggrieved, Caterpillar assailed the order of Judge Lerma for the withdrawal of Criminal Cases
Nos. 02-240 to 02-2432003 by petition for certiorari in the CA on October 16, 2003, docketed as
CA-G.R. SP No. 79937,36 and the CA ultimately granted the petition for certiorari,37 setting aside
the assailed January 13, 2003 resolution of the Acting Justice Secretary and directing the re-filing
of the withdrawn informations against Samson. The Court ultimately affirmed the CA's dec ision
through the resolution promulgated on October 17, 2005 in G.R. No. 169199, and ruling that
probable cause existed for the re-filing of the criminal charges for unfair competition under the IP
Code.38
In the assailed January 21, 2004 decision,39 the CA dismissed Caterpillar's petition for certiorari in
CA-G.R. SP No. 75526, viz.:
Petition has no merit.
The mere fact that public respondent denied petitioner's motion for reconsideration does not
justify this petition on the ground of abuse of discretion. Grave abuse of discretion means such
capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or, in other
words where the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility and it must be so patent and gross as to amount to an evasion of positive duty
or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. (Benito
vs. Comelec, 349 SCRA 705).
Petitioner in this case failed to overcome the burden of showing how public respondent acted
with grave abuse of discretion in granting private respondent's motion and denying his own
motion for reconsideration. What is clear is that public respondent court acted judiciously. A
petition for certiorariunder Rule 65 of the Rules of Court will prosper only if there is showing of
grave abuse of discretion or an act without or in excess of jurisdiction on the part of respondent
tribunal (Garcia vs. HRET, 312 SCRA 353).
Granting arguendo that public respondent court erred in its ruling, still a petition for certiorari
under Rule 65 cannot be justified. Where the court has jurisdiction over the subject matter, the
orders or decision upon all questions pertaining to the cause are orders or decisions within its
jurisdiction and however erroneous they may be, they cannot be corrected by certiorari (De
Baron vs. Court of Appeals, 368 SCRA 407).
WHEREFORE, foregoing premises considered, the Petition having no merit in fact and in law is
hereby DENIED DUE COURSE and ordered DISMISSED. With costs to Petitioners.
SO ORDERED.40
Caterpillar sought the reconsideration of the dismissal, but the CA denied the motion on June
30, 2004.41
Hence, Caterpillar appealed the CA's decision in C.A.-G.R. SP No. 75526 (G.R. No. 164352).
G .R. No. 205972
In the meanwhile, in August 2002, upon receiving the information that Samson and his affiliate
entities continuously sold and distributed products bearing Caterpillar's Core Marks without
Caterpillar's consent, the latter requested the assistance of the Regional Intelligence and
Investigation Division of the National Region Public Police (RIID-NCRPO) for the conduct of an
investigation. Subsequently, after the investigation, the RIID-NCRPO applied for and was granted
16 search warrants against various outlets owned or operated by Samson in Mandaluyong,
Quezon City, Manila, Caloocan, Makati, Parañaque, Las Piñas, Pampanga and Cavite. The
warrants were served on August 27, 2002,42 and as the result products bearing Caterpillar's Core
Marks were seized and confiscated. Consequently, on the basis of the search warrants issued by
the various courts, Caterpillar again instituted criminal complaints in the DOJ for violation of
Section 168.3(a), in relation to Sections 131.3, 123.l(e) and 170 of the IP Code against Samson,
docketed as LS. Nos. 2002-995 to 2002-997; 2002-999 to 2002-1010; and 2002-1036.
After the conduct of the preliminary investigation, the DOJ, through State Prosecutor Melvin
J.Abad, issued a joint resolution dated August 21, 2003 dismissing the complaint upon finding
that there was no probable cause to charge Samson with unfair competition.43
Caterpillar moved for the reconsideration of the dismissal, but State Prosecutor Abad denied the
motion on June 18, 2004.44
The Secretary of Justice affirmed the dismissal of the complaint through the resolution issued on
September 19, 2005,45 and denied Caterpillar's motion for reconsideration on December 20,
2007.
Accordingly, Caterpillar appealed to the CA through a petition for review under Rule 43, Rules of
Court (C.A.-G.R. SP No. 102316).46
On May 8, 2012,47 however, the CA denied due course to Caterpillar's petition for review, viz.:
WHEREFORE, premises considered, the petition is DENIED DUE COURSE, and accordingly,
DISMISSED.
SO ORDERED.48
The CA opined that an appeal under Rule 43 to assail the resolution by the Secretary of Justice
determining the existence or non-existence of probable cause was an improper remedy; and that
while it could treat an appeal as a special civil action for certiorari under Rule 65, it could not do
so therein because the allegations of the petition did not sufficiently show grave abuse of
discretion on the part of the Secretary of Justice in issuing the assailed resolutions.
Caterpillar filed a motion for reconsideration, but the CA denied the motion for its lack of merit
on February 12, 2013.49
Hence, Caterpillar commenced G.R. No. 205972.
Issues
Caterpillar submits that the CA erred as follows:
G.R. No. 164352
A.
THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN DENYING DUE
COURSE TO CATERPILLAR INC.'S PETITION FOR CERTIORARI.
B.
THE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN NOT HOLDING THAT
THE ORDER SUSPENDING PROCEEDINGS IN CRIMINAL CASES NOS. 02-238 TO 02-243, ON
THE BASIS OF AN ALLEGED PREJUDICIAL QUESTION, WAS CONTRARY TO LAW AND
ESTABLISHED JURISPRUDENCE.
C.
THE HONORABLE COURT OF APPEALS COMMITTED SERIOUS REVERSIBLE ERROR IN NOT
HOLDING THAT A CRIMINAL COMPLAINT FOR UNFAIR COMPETITION CAN PROCEED
INDEPENDENTLY OF, AND SIMULTANEOUS WITH, THE CIVIL CASE FOR THE SAME.50
Caterpillar posits that the suspension of proceedings in Criminal Cases Nos. 02-238 to 02-243
was contrary to Rule 111 of the Rules of Court, Article 33 of the Civil Code on independent civil
actions, and Section 170 of the IP Code, which specifically provides that the criminal penalties for
unfair competition were independent of the civil and administrative sanctions imposed by law;
that the determination of the lawful owner of the "CATERPILLAR" trademark in Civil Case No. Q-
00-41446 would not be decisive of the guilt of Samson for unfair competition in Criminal Cases
Nos. 02-238 to 02-243 because registration was not an element of the crime of unfair
competition; that the civil case sought to enforce Samson's civil liability arising from the IP Code
while the criminal cases would enforce Samson's liability arising from the crime of unfair
competition; and that the Court already ruled in Samson v. Daway51 that Civil Case No. Q-00-
41446 was an independent civil action under Article 33 of the Civil Code and, as such, could
proceed independently of the criminal actions.
In his comment,52 Samson counters that the issues of the lawful and registered owner of the
trademark, the true owner of the goodwill, and whether "CATERPILLAR" was an internationally
well-known mark are intimately related to the issue of guilt in the criminal actions, the resolution
of which should determine whether or not the criminal actions for unfair competition could
proceed.
G.R. No. 205972
In this appeal, the petitioner interposes that:
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONER'S PETITION
FOR REVIEW SOLELY ON THE GROUND OF AN ALLEGED WRONG REMEDY, DESPITE
PETITIONERS HAVING CLEARLY ESTABLISHED THAT THE SECRETARY OF JUSTICE ACTED
WITH GRAVE ABUSE OF DISCRETION IN ISSUING THE RESOLUTIONS DATED 19 SEPTEMBER
2005 AND 20 DECEMBER 2007, AFFIRMING THE FINDINGS OF THE INVESTIGATING
PROSECUTOR THAT NO PROBABLE CAUSE EXISTS TO CHARGE THE RESPONDENT OF THE
CRIME OF UNFAIR COMPETITION.53
Caterpillar seeks the liberal interpretation of procedural rules in order to serve the higher
interest of substantial justice following the denial by the CA of its petition for being an incorrect
remedy; and insists that it presented substantial evidence to warrant a finding of probable cause
for unfair competition against Samson.
In sum, the issues to be resolved in these consolidated cases are: firstly, whether or not the CA
committed a reversible error in ruling that the trial court a quo did not commit grave abuse of
discretion in suspending the criminal proceedings on account of a prejudicial question; and,
secondly, whether or not the CA committed reversible error in upholding the decision of the
Secretary of Justice finding that there was no probable cause to charge Samson with unfair
competition.
Rulings of the Court
G.R. No. 164352
The appeal in G.R. No. 164352 is meritorious.
We note, to begin with, that Civil Case No. Q-00-41446, the civil case filed by Caterpillar in the
RTC in Quezon City, was for unfair competition, damages and cancellation of trademark, while
Criminal Cases Nos. Q-02-108043-44 were the criminal prosecution of Samson for unfair
competition. A common element of all such cases for unfair competition - civil and criminal - was
fraud. Under Article 33 of the Civil Code, a civil action entirely separate and distinct from the
criminal action may be brought by the injured party in cases of fraud, and such civil action shall
proceed independently of the criminal prosecution. In view of its being an independent civil
action, Civil Case No. Q-00-41446 did not operate as a prejudicial question that justified the
suspension of the proceedings in Criminal Cases Nos. Q-02-108043-44.
In fact, this issue has already been raised in relation to the suspension of the arraignment of
Samson in Criminal Cases Nos. Q-02-108043-44 in Samson v. Daway,54 and the Court resolved it
against Samson and in favor of Caterpillar thusly:
Anent the second issue, petitioner failed to substantiate his claim that there was a prejudicial
question. In his petition, he prayed for the reversal of the March 26, 2003 order which sustained
the denial of his motion to suspend arraignment and other proceedings in Criminal Case Nos. Q-
02-108043-44. For unknown reasons, however, he made no discussion in support of said prayer in
his petition and reply to comment. Neither did he attach a copy of the complaint in Civil Case
No. Q-00-41446 nor quote the pertinent portion thereof to prove the existence of a prejudicial
question.
At any rate, there is no prejudicial question if the civil and the criminal action can, according to
law, proceed independently of each other. Under Rule 111, Section 3 of the Revised Rules on
Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, the
independent civil action may be brought by the offended party. It shall proceed independently of
the criminal action and shall require only a preponderance of evidence.
In the case at bar, the common element in the acts constituting unfair competition under Section
168 of R.A. No. 8293 is fraud. Pursuant to Article 33 of the Civil Code, in cases of defamation,
fraud, and physical injuries, a civil action for damages, entirely separate and distinct from the
criminal action, may be brought by the injured party. Hence, Civil Case No. Q-00-41446, which as
admitted by private respondent also relate to unfair competition, is an independent civil action
under Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that will
justify the suspension of the criminal cases at bar.55 (Bold emphasis supplied)
Secondly, a civil action for damages and cancellation of trademark cannot be considered a
prejudicial question by which to suspend the proceedings in the criminal cases for unfair
competition. A prejudicial question is that which arises in a civil case the resolution of which is a
logical antecedent of the issues to be determined in the criminal case. It must appear not only
that the civil case involves facts upon which the criminal action is based, but also that the
resolution of the issues raised in the civil action will necessarily be determinative of the criminal
case.56 As stated in Librodo v. Judge Coscolluela, Jr.:57
A prejudicial question is one based on a fact distinct and separate from the crime but so
intimately connected with it that it determines the guilt or innocence of the accused, and for it to
suspend the criminal action, it must appear not only that said case involves facts intimately
related to those upon which the criminal prosecution would be based but also that in the
resolution of the issue or issues raised in the civil case, the guilt or innocence of the accused
would necessarily be determined. It comes into play generally in a situation where a civil action
and a criminal action are both pending and there exists in the former an issue which must be
preemptively resolved before the criminal action may proceed, because howsoever the issue
raised in the civil action is resolved would be determinative juris et de jure of the guilt or
innocence of the accused in the criminal case.58 (Bold underscoring supplied for emphasis)
The elements of a prejudicial question are provided in Section 7 of Rule 111, Rules of Court, to
wit: (a) a previously instituted civil action involves an issue similar to or intimately related to the
issue raised in the subsequent criminal action, and (b) the resolution of such issue determines
whether or not the criminal action may proceed.59
An examination of the nature of the two kinds of cases involved is necessary to determine
whether a prejudicial question existed.
An action for the cancellation of trademark like Civil Case No. Q-00-41446 is a remedy available
to a person who believes that he is or will be damaged by the registration of a mark.60 On the
other hand, the criminal actions for unfair competition (Criminal Cases Nos. Q-02-108043-44)
involved the determination of whether or not Samson had given his goods the general
appearance of the goods of Caterpillar, with the intent to deceive the public or defraud
Caterpillar as his competitor.61 In the suit for the cancellation of trademark, the issue of lawful
registration should necessarily be determined, but registration was not a consideration necessary
in unfair competition.62 Indeed, unfair competition is committed if the effect of the act is "to pass
off to the public the goods of one man as the goods of another;"63 it is independent of
registration. As fittingly put in R.F. & Alexander & Co. v. Ang,64 "one may be declared unfair
competitor even if his competing trade-mark is registered."
Clearly, the determination of the lawful ownership of the trademark in the civil action was not
determinative of whether or not the criminal actions for unfair competition shall proceed against
Samson.
G.R. No. 205972
The petition for review on certiorari in G.R. No. 205972 is denied for being bereft of
merit.1âwphi1
Firstly, Caterpillar assailed the resolution of the Secretary of Justice by filing a petition for review
under Rule 43 of the Rules of Court. Such resort to the petition for review under Rule 43 was
erroneous,65 and the egregious error warranted the denial of the appeal. The petition for review
under Rule 43 applied to all appeals to the CA from quasi-judicial agencies or bodies, particularly
those listed in Section 1 of Rule 43. However, the Secretary of Justice, in the review of the
findings of probable cause by the investigating public prosecutor, was not exercising a quasi-
judicial function, but performing an executive function.66
Moreover, the courts could intervene in the determination of probable cause only through the
special civil action for certiorari under Rule 65 of the Rules of Court, not by appeal through the
petition for review under Rule 43. Thus, the CA could not reverse or undo the findings and
conclusions on probable cause by the Secretary of Justice except upon clear demonstration of
grave abuse of discretion amounting to lack or excess of jurisdiction committed by the Secretary
of Justice.67 Caterpillar did not so demonstrate.
And, secondly, even discounting the technicalities as to consider Caterpillar's petition for review
as one brought under Rule 65, the recourse must still fail.
Probable cause for the purpose of filing an information in court consists in such facts and
circumstances as would engender a well-founded belief that a crime has been committed and the
accused may probably be guilty thereof.68The determination of probable cause lies solely within
the sound discretion of the investigating public prosecutor after the conduct of a preliminary
investigation. It is a sound judicial policy to refrain from interfering with the determination of
what constitutes sufficient and convincing evidence to establish probable cause for the
prosecution of the accused.69 Thus, it is imperative that by the nature of his office, the public
prosecutor cannot be compelled to file a criminal information in court if he is not convinced of
the sufficiency of the evidence adduced for a finding of probable cause.70 Neither can he be
precluded from filing an information if he is convinced of the merits of the case.
In not finding probable cause to indict Samson for unfair competition, State Prosecutor Abad as
the investigating public prosecutor discharged the discretion given to him by the law.
Specifically, he resolved as follows:
It appears from the records that respondent started marketing his (class 25) products bearing the
trademark Caterpillar as early as 1992. In 1994, respondent caused the registration of the
trademark "Caterpillar With A Triangle Device Beneath The Letter [A]" with the Intellectual
Property Office. Sometime on June 16, 1997, the IPO issued Certificate of Registration No.
64705 which appears to be valid for twenty (20) years, or up to June 16, 2017. Upon the strength
of this registration, respondent continued with his business of marketing shoes, slippers, sandals,
boots and similar Class 25 items bearing his registered trademark "Caterpillar". Under the law,
respondent's operative act of registering his Caterpillar trademark and the concomitant
approval/issuance by the governmental entity concerned, conferred upon him the exclusive right
to use said trademark unless otherwise declared illegal. There being no evidence to controvert
the fact that respondent's Certificate of Registration No. 64705 covering Caterpillar trademark
was fraudulently or illegally obtained, it necessarily follows that its subsequent use and/or being
passed on to the public militates malice or fraudulent intent on the part of respondent.
Otherwise stated and from the facts obtaining, presumption of regularity lies, both from the
standpoint of registration and use/passing on of the assailed Caterpillar products.
Complainant's argument that respondent may still be held liable for unfair competition by reason
of his having passed on five (5) other Caterpillar products like "Cat", "Caterpillar", "Cat and
Design", "Walking Machines" and "Track-Type Tractor Design" is equally difficult to sustain. As
may be gleaned from the records, respondent has been engaged in the sale and distribution of
Caterpillar products since 1992 leading to the establishment of numerous marketing outlets. As
such, it would be difficult to assail the presumption that respondent has already established
goodwill insofar as his registered Caterpillar products are concerned. On the other hand,
complainant's registration of the other Caterpillar products appears to have been caused only in
1995. In this premise, respondent may be considered as prior user, while the latter, a subsequent
one. Jurisprudence dictates that prior user of the trademark by one, will controvert the claim by
a subsequent one.71
We reiterate that the full discretionary authority to determine the existence of probable cause is
lodged in the Executive Branch of the Government, through the public prosecutor, in the first
instance, and the Secretary of Justice, on review. Such authority is exclusive, and the courts are
prohibited from encroaching on the executive function, unless there is a clear showing of grave
abuse of discretion amounting to lack or excess of jurisdiction on the part of the public
prosecutor or the Secretary of Justice. As declared in Callo-Claridad v. Esteban:72
A public prosecutor alone determines the sufficiency of evidence that establishes the probable
cause justifying the filing of a criminal information against the respondent because the
determination of existence of a probable cause is the function of the public prosecutor.
Generally, the public prosecutor is afforded a wide latitude of discretion in the conduct of a
preliminary investigation. Consequently, it is a sound judicial policy to refrain from interfering in
the conduct of preliminary investigations, and to just leave to the Department of Justice the
ample latitude of discretion in the determination of what constitutes sufficient evidence to
establish probable cause for the prosecution of supposed offenders. Consistent with this policy,
courts do not reverse the Secretary of Justice's findings and conclusions on the matter of
probable cause except in clear cases of grave abuse of discretion. By way of exception, however,
judicial review is permitted where the respondent in the preliminary investigation clearly
establishes that the public prosecutor committed grave abuse of discretion, that is, when the
public prosecutor has exercised his discretion in an arbitrary, capricious, whimsical or despotic
manner by reason of passion or personal hostility, patent and gross enough as to amount to an
evasion of a positive duty or virtual refusal to perform a duty enjoined by law. Moreover, the trial
court may ultimately resolve the existence or nonexistence of probable cause by examining the
records of the preliminary investigation when necessary for the orderly administration of justice.
Although policy considerations call for the widest latitude of deference to the public prosecutor's
findings, the courts should never shirk from exercising their power, when the circumstances
warrant, to determine whether the public prosecutor's findings are supported by the facts, and
by the law.
Relevantly, grave abuse of discretion means such capricious or whimsical exercise of judgment
that is equivalent to lack of jurisdiction. The abuse of discretion must be grave, as when the
power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility,
and it must be so patent and gross as to amount to an evasion of a positive duty or to a virtual
refusal to perform the duty enjoined, or to act at all, in contemplation of law, as to be equivalent
to having acted without jurisdiction.73 Herein, Caterpillar did not show the grave abuse of
discretion on the part of the Secretary of Justice.
WHEREFORE, the Court GRANTS the petition for review in G.R. No. 164352; SETS ASIDE the
decision promulgated on January 21, 2004 in CA-G.R. SP No. 75526; DIRECTS the Regional Trial
Court in Muntinlupa City to reinstate Criminal Cases Nos. Q-02-108043-44 and forthwith try and
decide them without undue delay; DENIES the petition for review on certiorari in G.R. No.
205972; and ORDERS respondent Manolo P. Samson to pay the costs of suit.
SO ORDERED.

G.R. No. 110544 October 17, 1995


REYNALDO V. TUANDA, Mayor of the Municipality of Jimalalud, Negros Oriental,
HERMINIGILDO FABURADA, (former Vice-Mayor), SANTOS A. VILLANUEVA, Incumbent
Member of the Sangguniang Bayan, MANUEL LIM, NICANOR R. AGOSTO, ERENIETA K.
MENDOZA MAXIMINO A. VIERNES, HACUBINA V. SERILLO, ILUMINADO D. ESTRELLANES,
and FORMER MEMBERS OF THE SANGGUNIANG BAYAN OF JIMALALUD, NEGROS
ORIENTAL, petitioners,
vs.
THE HONORABLE SANDIGANBAYAN, (THIRD DIVISION), BARTOLOME BINAOHAN and DELIA
ESTRELLANES, respondents.

KAPUNAN, J.:
Petitioners institute this special civil action for certiorari and prohibition under Rule 65 of the
Revised Rules of Court to set aside the resolution of the Sandiganbayan dated 17 February 1992
and its orders dated 19 August 1992 and 13 May 1993 in Criminal Case No. 16936 entitled
"People of the Philippines versus Reynaldo Tuanda, et al." denying petitioners' motion for
suspension of their arraignment.
The present controversy arose from the following antecedents:
On 9 February 1989, private respondents Delia Estrellanes and Bartolome Binaohan were
designated as industrial labor sectoral representative and agricultural labor sectoral
representative respectively, for the Sangguniang Bayan of Jimalalud, Province of Negros Oriental
by then Secretary Luis T. Santos of the Department of Local Government. Private respondents
Binaohan and Estrellanes took their oath of office on 16 February 1989 and 17 February 1989,
respectively.
Subsequently, petitioners filed an undated petition with the Office of the President for review
and recall of said designations. The latter, however, in a letter dated 20 March 1989, denied the
petition and enjoined Mayor Reynaldo Tuanda to recognize private respondents as sectoral
representatives.
On 4 May 1990, private respondents filed a petition for mandamus with the Regional Trial Court
of Negros Oriental, Branch 35, docketed as Special Civil Action No. 9661, for recognition as
members of the Sangguniang Bayan. It was dismissed on 23 July 1991.
Thereafter, on 20 June 1991, petitioners filed an action with the Regional Trial Court of
Dumaguete City to declare null and void the designations of private respondents as sectoral
representatives, docketed as Civil Case No. 9955 entitled "Reynaldo Tuanda, et al. versus
Secretary of the Department of Local Government, et al."
On 21 July 1991, an information was filed before the Sandiganbayan, docketed as Criminal Case
No. 16936 entitled "People of the Philippines versus Reynaldo Tuanda, et al." charging
petitioners thus:
INFORMATION
The undersigned Special Prosecution Officer of the Special Prosecutor, hereby accuses
REYNALDO V. TUANDA, HERMENEGILDO G. FABURADA, MANUEL LIM, NICANOR P.
AGOSTO, ERENIETA K. MENDOZA, MAXIMO VIERNES, HACUBINA V. SERILLO, and SANTOS
A. VILLANUEVA of Violation of Section 3(e) of R.A. No. 3019, as amended, committed as follows:
That during the period from February 1989 to February 1991 and subsequent thereto, in the
Municipality of Jimalalud, Negros Oriental, and within the jurisdiction of this Honorable Court,
accused, all public officers, Mayor REYNALDO V. TUANDA, Vice-Mayor HERMENEGILDO G.
FABURADA, Sangguniang Members MANUEL LIM, NICANOR P. AGOSTO, ERENIETA K.
MENDOZA, MAXIMO A. VIERNES, HACUBINA V. SERILLO, ILUMINADO D. ESTRELLANES and
SANTOS A. VILLANUEVA while in the performance of their official functions and taking
advantage of their public positions, with evident bad faith, manifest partiality, and conspiring and
confederating with each other did, then and there, wilfully and unlawfully cause undue injury to
Sectoral Members Bartolome M. Binaohan and Delia T. Estrellanes by refusing to pay despite
demand the amount of NINETY FIVE THOUSAND THREE HUNDRED FIFTY PESOS (P95,350.00)
and ONE HUNDRED EIGHT THOUSAND NINE HUNDRED PESOS (P108,900.00) representing
respectively their per diems, salaries and other privileges and benefits, and such undue injury
continuing to the present to the prejudice and damage of Bartolome Binaohan and Delia
Estrellanes.
CONTRARY TO LAW. 1
On 9 September 1991, petitioners filed a motion with the Sandiganbayan for suspension of the
proceedings in Criminal Case No. 16936 on the ground that a prejudicial question exists in Civil
Case No. 9955 pending before the Regional Trial Court of Dumaguete City.2
On 16 January 1992, the Regional Trial Court rendered a decision declaring null and void ab initio
the designations issued by the Department of Local Government to the private respondents as
sectoral representatives for having been done in violation of Section 146 (2) of B.P. Blg. 337,
otherwise known as the Local Government Code.3
The trial court expounded thus:
The Supreme Court in the case of Johnny D. Supangan Jr. v. Luis T. Santos, et al., G.R. No.
84663, along with 7 companion cases of similar import, (G.R. Nos. 05012, 87601, 87602, 87792,
87935, 88072, and 90205) all promulgated on August 24, 1990, ruled that:
B.P. Blg. 337 explicitly required that before the President (or the Secretary of the Department of
Local Government) may appoint members of the local legislative bodies to represent the
Industrial and Agricultural Labor Sectors, there must be a determination to be made by the
Sanggunian itself that the said sectors are of sufficient number in the city or municipality to
warrant representation after consultation with associations and persons belonging to the sector
concerned.
The Supreme Court further ruled —
For that matter, the Implementing Rules and Regulations of the Local Government Code even
prescribe the time and manner by which such determination is to be conducted by the
Sanggunian.
Consequently, in cases where the Sanggunian concerned has not yet determined that the
Industrial and Agricultural Labor Sectors in their particular city or municipality are of sufficient
number to warrant representation, there will absolutely be no basis for the
designation/appointments.
In the process of such inquiry as to the sufficiency in number of the sector concerned to warrant
representation, the Sanggunian is enjoined by law (B.P. Blg. 337) to consult with associations and
persons belonging to the sector concerned. Consultation with the sector concerned is made a
pre-requisite. This is so considering that those who belong to the said sector are the ones
primarily interested in being represented in the Sanggunian. In the same aforecited case, the
Supreme Court considers such prior determination by the Sanggunian itself (not by any other
person or body) as a condition sine qua non to a valid appointment or designation.
Since in the present case, there was total absence of the required prior determination by the
Sangguniang Bayan of Jimalalud, this Court cannot help but declare the designations of private
defendants as sectoral representatives null and void.
This verdict is not without precedence. In several similar cases, the Supreme Court invariably
nullified the designations where the requirements of Sec. 146 (2), B.P. Blg. 337 were not
complied with. Just to cite one case, the Supreme Court ruled:
There is no certification from the Sangguniang Bayan of Valenzuela that the sectors concerned
are of sufficient number to warrant representation and there was no consultation whatsoever
with the associations and persons belonging to the Industrial and Agricultural Labor Sectors.
Therefore, the appointment of private respondents Romeo F. Bularan and Rafael Cortez are null
and void (Romeo Llanado, et al. v. Hon. Luis Santos, et al., G.R. No. 86394, August 24, 1990).4
Private respondents appealed the aforestated decision to the Court of Appeals, docketed as CA-
G.R. CV No. 36769, where the same is currently pending resolution.
Meanwhile, on 17 February 1992, respondent Sandiganbayan issued a resolution denying the
motion for suspension of proceedings filed by petitioners. Said respondent Sandiganbayan:
Despite the pendency of Civil Case No. 9955 of the Regional Trial Court of Negros Oriental, it
appears, nevertheless, that the private complainants have been rendering services on the basis
of their respective appointments as sectoral members of the Sangguniang Bayan of the
Municipality of Jimalalud, Negros Oriental; and that their said appointments enjoy the
presumption of regularity. Having rendered such services, the private complainants are entitled
to the salaries attached to their office. Even assuming arguendo that the said Regional Trial
Court shall later decide that the said appointments of the private complainants are null and void,
still the private complainants are entitled to their salaries and compensation for service they have
actually rendered, for the reason that before such judicial declaration of nullity, the private
complainants are considered at least de facto public officers acting as such on the basis of
apparently valid appointments issued by competent authorities. In other words, regardless of the
decision that may be rendered in Civil Case
No. 9955, the private complainants are entitled to their withheld salaries for the services they
have actually rendered as sectoral representatives of the said Sangguniang Bayan. Hence, the
decision that may be rendered by the Regional Trial Court in Civil Case No. 9955 would not be
determinative of the innocence or guilt of the accused.
WHEREFORE, the subject Petition for the Suspension of Proceedings in Virtue of Prejudicial
Question filed by the accused through counsel, is hereby DENIED for lack of merit.
SO ORDERED.5
Petitioners filed a motion for reconsideration of the aforementioned resolution in view of the
decision promulgated by the trial court nullifying the appointments of private respondents but it
was, likewise, denied in an order issued by respondent Sandiganbayan on 19 August 1992 on the
justification that the grounds stated in the said motion were a mere rehash of petitioners' original
motion to hold the case in abeyance.6 The dispositive portion of its order reads as follows:
WHEREFORE, in view of the foregoing, the arraignment of the accused which was scheduled
today is cancelled. Mayor Reynaldo Tuanda, Hermenegildo Faburada, Nicanor P. Agosto,
Erenieta K. Mendoza, Hacubina V. Serillo and Iluminado Estrellanes are, however, hereby
ordered to show cause in writing within ten (10) days from service hereof why they should not be
cited for contempt of court for their failure to appear in court today for arraignment.
In case of an adverse resolution on the motion to quash which is to be filed by the counsel for the
defense, set this case for arraignment, pre-trial and trial on January 4 & 5, 1993, on all dates the
trial to start at 8:30 o'clock in the morning.
SO ORDERED.7
On 19 February 1993, respondent Sandiganbayan issued an order holding consideration of all
incidents pending the issuance of an extended resolution.8
No such resolution, however, was issued and in its assailed order dated 13 May 1992, respondent
Sandiganbayan set the arraignment of petitioners on 30 June 1993. The dispositive portion of the
order reads:
WHEREFORE, considering the absence of the accused from the scheduled hearing today which
We deem to be excusable, reset this case for arraignment on June 30, 1993 and for trial on the
merits on June 30 and July 1 and 2, 1993, on all dates the trial to start at 8:30 o'clock in the
morning.
Give proper notice to the accused and principal counsel, Atty. Alfonso Briones. Considering that
the accused come all the way from Himalalud, Negros Oriental, no postponement will be
allowed.
SO ORDERED.9
Hence, this special civil action for certiorari and prohibition where petitioners attribute to
respondent Sandiganbayan the following errors:
A. The Respondent Court committed grave abuse of discretion in denying petitioners'
motions for the suspension of the proceedings in Criminal Case No. 16936 in spite of the
pendency of a prejudicial issue before the Court of Appeals in CA-G.R. CV No. 36769;
B. The Respondent Court acted without or in excess of jurisdiction in refusing to suspend
the proceedings that would entail a retrial and rehearing by it of the basic issue involved, i.e., the
validity of the appointments of private respondents and their entitlement to compensation which
is already pending resolution by the Court of Appeals in C.A. G.R. CV No. 36769; and
C. The Respondent Court committed grave abuse of discretion and/or acted without or in
excess of jurisdiction in effectively allowing petitioners to be prosecuted under two alternative
theories that private respondents are de jure and/or de facto officers in violation of petitioners'
right to due process.10
In sum, the only issue in the case at bench is whether or not the legality or validity of private
respondents' designation as sectoral representatives which is pending resolution in CA-G.R. No.
36769 is a prejudicial question justifying suspension of the proceedings in the criminal case
against petitioners.
A prejudicial question is one that must be decided before any criminal prosecution may be
instituted or before it may proceed (see Art. 36, Civil Code) because a decision on that point is
vital to the eventual judgment in the criminal case. Thus, the resolution of the prejudicial question
is a logical antecedent of the issues involved in said criminal case.11
A prejudicial question is defined as that which arises in a case the resolution of which is a logical
antecedent of the issue involved therein, and the cognizance of which pertains to another
tribunal. The prejudicial question must be determinative of the case before the court but the
jurisdiction to try and resolve the question must be lodged in another court or tribunal.12 It is a
question based on a fact distinct and separate from "the crime but so intimately connected with
it that it determines the guilt or innocence of the accused, and for it to suspend the criminal
action, it must appear not only that said case involves facts intimately related to those upon
which the criminal prosecution would be based but also that in the resolution of the issue or
issues raised in the civil case, the guilt or innocence of the accused would necessarily be
determined. It comes into play generally in a situation where a civil action and a criminal action
are both pending and there exists in the former an issue which must be preemptively resolved
before the criminal action may proceed, because howsoever the issue raised in the civil action is
resolved would be determinative juris et de jure of the guilt or innocence of the accused in the
criminal case."13
The rationale behind the principle of prejudicial question is to avoid two conflicting decisions.14 It
has two essential elements:
(a) the civil action involves an issue similar or intimately related to the issue raised in the
criminal action; and
(b) the resolution of such issue determines whether or not the criminal action may proceed.15
Applying the foregoing principles to the case at bench, we find that the issue in the civil case,
CA-G.R. CV No. 36769, constitutes a valid prejudicial question to warrant suspension of the
arraignment and further proceedings in the criminal case against petitioners.
All the elements of a prejudicial question are clearly and unmistakably present in this case. There
is no doubt that the facts and issues involved in the civil action (No. 36769) and the criminal case
(No. 16936) are closely related. The filing of the criminal case was premised on petitioners'
alleged partiality and evident bad faith in not paying private respondents' salaries and per diems
as sectoral representatives, while the civil action was instituted precisely to resolve whether or
not the designations of private respondents as sectoral representatives were made in accordance
with law.
More importantly, ,the resolution of the civil case will certainly determine if there will still be any
reason to proceed with the criminal action.
Petitioners were criminally charged under the Anti-Graft & Corrupt Practices Act (RA 3019, sec,
3[e]) due to their refusal, allegedly in bad faith and with manifest partiality, to pay private
respondents' salaries as sectoral representatives. This refusal, however, was anchored on
petitioners' assertion that said designations were made in violation of the Local Government
Code (B.P. Blg. 337) and thus, were null and void. Therefore, should the Court of Appeals uphold
the trial court's decision declaring null and void private respondents' designations as sectoral
representatives for failure to comply with the provisions of the Local Government Code (B.P. Blg.
337, sec. 146[2]), the charges against petitioners would no longer, so to speak, have a leg to
stand on. Petitioners cannot be accused of bad faith and partiality there being in the first place
no obligation on their part to pay private respondents' claims. Private respondents do not have
any legal right to demand salaries, per diems and other benefits. In other words, the Court of
Appeals' resolution of the issues raised in the civil action will ultimately determine whether or not
there is basis to proceed with the criminal case.
Private respondents insist that even if their designations are nullified, they are entitled to
compensation for actual services rendered.16 We disagree. As found by the trial court and as
borne out by the records, from the start, private respondents' designations as sectoral
representatives have been challenged by petitioners. They began with a petition filed with the
Office of the President copies of which were received by private respondents on 26 February
1989, barely eight (8) days after they took their oath of office.17 Hence, private respondents'
claim that they have actually rendered services as sectoral representatives has not been
established.
Finally, we find unmeritorious respondent Sandiganbayan's thesis that even in the event that
private respondents' designations are finally declared invalid, they may still be considered de
facto public officers entitled to compensation for services actually rendered.
The conditions and elements of de facto officership are the following:
1) There must be a de jure office;
2) There must be color of right or general acquiescence by the public; and
3) There must be actual physical possession of the office in good faith.18
One can qualify as a de facto officer only if all the aforestated elements are present. There can
be no de facto officer where there is no de jure office, although there may be a de facto officer in
a de jure office.19
WHEREFORE, the resolution dated 17 February 1992 and orders dated 19 August 1992 and 13
May 1993 of respondent Sandiganbayan in Criminal Case No. 16936 are hereby SET ASIDE.
Respondent Sandiganbayan is enjoined from proceeding with the arraignment and trial of
petitioners in Criminal Case No. 16936 pending final resolution of CA-G.R. CV No. 36769.
SO ORDERED.

[G.R. No. 137567. June 20, 2000]


MEYNARDO L. BELTRAN, petitioner, vs. PEOPLE OF THE PHILIPPINES, and HON. JUDGE
FLORENTINO TUAZON, JR., being the Judge of the RTC, Branch 139, Makati City, respondents.
DECISION
BUENA, J.:
This petition for review, filed under Rule 45 of the 1997 Rules of Civil Procedure, seeks to review
and set aside the Order dated January 28, 1999 issued by Judge Florentino A. Tuazon, Jr. of the
Regional Trial Court of Makati City, Branch 139 in Special Civil Case No. 98-3056, entitled
"Meynardo Beltran vs. People of the Philippines and Hon. Judge Alden Cervantes of the
Metropolitan Trial Court of Makati city, Branch 61." The said Order denied petitioners prayer for
the issuance of a writ of preliminary injunction to enjoin Judge Cervantes from proceeding with
the trial of Criminal Case No. 236176, a concubinage case against petitioner on the ground that
the pending petition for declaration of nullity of marriage filed by petitioner against his wife
constitutes a prejudicial question.
The antecedent facts of the case are undisputed:
Petitioner Meynardo Beltran and wife Charmaine E. Felix were married on June 16, 1973 at the
Immaculate Concepcion Parish Church in Cubao, Quezon City.[1]
On February 7, 1997, after twenty-four years of marriage and four children,[2] petitioner filed a
petition for nullity of marriage on the ground of psychological incapacity under Article 36 of the
Family Code before Branch 87 of the Regional Trial Court of Quezon City. The case was
docketed as Civil Case No. Q-97-30192.[3]
In her Answer to the said petition, petitioner's wife Charmaine Felix alleged that it was petitioner
who abandoned the conjugal home and lived with a certain woman named Milagros Salting.[4]
Charmaine subsequently filed a criminal complaint for concubinage[5] under Article 334 of the
Revised Penal Code against petitioner and his paramour before the City Prosecutor's Office of
Makati who, in a Resolution dated September 16, 1997, found probable cause and ordered the
filing of an Information[6]against them. The case, docketed as Criminal Case No. 236176, was filed
before the Metropolitan Trial Court of Makati City, Branch 61.
On March 20, 1998, petitioner, in order to forestall the issuance of a warrant for his arrest, filed a
Motion to Defer Proceedings Including the Issuance of the Warrant of Arrest in the criminal case.
Petitioner argued that the pendency of the civil case for declaration of nullity of his marriage
posed a prejudicial question to the determination of the criminal case. Judge Alden Vasquez
Cervantes denied the foregoing motion in the Order[7] dated August 31, 1998. Petitioner's
motion for reconsideration of the said Order of denial was likewise denied in an Order dated
December 9, 1998.
In view of the denial of his motion to defer the proceedings in the concubinage case, petitioner
went to the Regional Trial Court of Makati City, Branch 139 on certiorari, questioning the Orders
dated August 31, 1998 and December 9, 1998 issued by Judge Cervantes and praying for the
issuance of a writ of preliminary injunction.[8] In an Order[9] dated January 28, 1999, the Regional
Trial Court of Makati denied the petition for certiorari. Said Court subsequently issued another
Order[10] dated February 23, 1999, denying his motion for reconsideration of the dismissal of his
petition.
Undaunted, petitioner filed the instant petition for review.
Petitioner contends that the pendency of the petition for declaration of nullity of his marriage
based on psychological incapacity under Article 36 of the Family Code is a prejudicial question
that should merit the suspension of the criminal case for concubinage filed against him by his
wife.
Petitioner also contends that there is a possibility that two conflicting decisions might result from
the civil case for annulment of marriage and the criminal case for concubinage. In the civil case,
the trial court might declare the marriage as valid by dismissing petitioner's complaint but in the
criminal case, the trial court might acquit petitioner because the evidence shows that his
marriage is void on ground of psychological incapacity. Petitioner submits that the possible
conflict of the courts' ruling regarding petitioner's marriage can be avoided, if the criminal case
will be suspended, until the court rules on the validity of marriage; that if petitioner's marriage is
declared void by reason of psychological incapacity then by reason of the arguments submitted
in the subject petition, his marriage has never existed; and that, accordingly, petitioner could not
be convicted in the criminal case because he was never before a married man.
Petitioner's contentions are untenable.
The rationale behind the principle of prejudicial question is to avoid two conflicting decisions. It
has two essential elements: (a) the civil action involves an issue similar or intimately related to the
issue raised in the criminal action; and (b) the resolution of such issue determines whether or not
the criminal action may proceed.[11]
The pendency of the case for declaration of nullity of petitioner's marriage is not a prejudicial
question to the concubinage case. For a civil case to be considered prejudicial to a criminal action
as to cause the suspension of the latter pending the final determination of the civil case, it must
appear not only that the said civil case involves the same facts upon which the criminal
prosecution would be based, but also that in the resolution of the issue or issues raised in the
aforesaid civil action, the guilt or innocence of the accused would necessarily be determined.
Article 40 of the Family Code provides:
"The absolute nullity of a previous marriage may be invoked for purposes of remarriage on the
basis solely of a final judgment declaring such previous marriage void."
In Domingo vs. Court of Appeals,[12] this Court ruled that the import of said provision is that for
purposes of remarriage, the only legally acceptable basis for declaring a previous marriage an
absolute nullity is a final judgment declaring such previous marriage void, whereas, for purposes
of other than remarriage, other evidence is acceptable. The pertinent portions of said Decision
read:
"xxx Undoubtedly, one can conceive of other instances where a party might well invoke the
absolute nullity of a previous marriage for purposes other than remarriage, such as in case of an
action for liquidation, partition, distribution and separation of property between the erstwhile
spouses, as well as an action for the custody and support of their common children and the
delivery of the latters' presumptive legitimes. In such cases, evidence needs must be adduced,
testimonial or documentary, to prove the existence of grounds rendering such a previous
marriage an absolute nullity. These needs not be limited solely to an earlier final judgment of a
court declaring such previous marriage void."
So that in a case for concubinage, the accused, like the herein petitioner need not present a final
judgment declaring his marriage void for he can adduce evidence in the criminal case of the
nullity of his marriage other than proof of a final judgment declaring his marriage void.
With regard to petitioner's argument that he could be acquitted of the charge of concubinage
should his marriage be declared null and void, suffice it to state that even a subsequent
pronouncement that his marriage is void from the beginning is not a defense.
Analogous to this case is that of Landicho vs. Reloval[13] cited in Donato vs. Luna[14] where this
Court held that:
"xxx Assuming that the first marriage was null and void on the ground alleged by petitioner, that
fact would not be material to the outcome of the criminal case. Parties to the marriage should
not be permitted to judge for themselves its nullity, for the same must be submitted to the
judgment of the competent courts and only when the nullity of the marriage is so declared can it
be held as void, and so long as there is no such declaration the presumption is that the marriage
exists. Therefore, he who contracts a second marriage before the judicial declaration of nullity of
the first marriage assumes the risk of being prosecuted for bigamy."
Thus, in the case at bar it must also be held that parties to the marriage should not be permitted
to judge for themselves its nullity, for the same must be submitted to judgment of the
competent courts and only when the nullity of the marriage is so declared can it be held as void,
and so long as there is no such declaration the presumption is that the marriage exists for all
intents and purposes. Therefore, he who cohabits with a woman not his wife before the judicial
declaration of nullity of the marriage assumes the risk of being prosecuted for concubinage. The
lower court therefore, has not erred in affirming the Orders of the judge of the Metropolitan Trial
Court ruling that pendency of a civil action for nullity of marriage does not pose a prejudicial
question in a criminal case for concubinage.
WHEREFORE, for lack of merit, the instant petition is DISMISSED.
SO ORDERED.

G.R. No. 134887 July 27, 2006


PHILIPPINE AGILA SATELLITE, INC. represented by MICHAEL C. U. DE GUZMAN, petitioner,
vs.
SEC. JOSEFINA TRINIDAD LICHAUCO and the HON. OMBUDSMAN, respondents.
DECISION
CARPIO MORALES, J.:
On June 6, 1994, a Memorandum of Understanding1 (MOU) was entered into by a consortium of
private telecommunications carriers and the Department of Transportation and Communications
(DOTC) represented by then Secretary Jesus B. Garcia, Jr. relative to the launching, ownership,
operation and management of a Philippine satellite by a Filipino-owned or controlled private
consortium or corporation.
Pursuant to Article IV of the MOU, the consortium of private telecommunications carriers formed
a corporation and adopted the corporate name Philippine Agila Satellite, Inc. (PASI), herein
petitioner.
By letter2 dated June 28, 1996, PASI president Rodrigo A. Silverio (Silverio) requested the then
DOTC Secretary Amado S. Lagdameo, Jr. for official government confirmation of the assignment
of Philippine orbital slots 161ºE and 153ºE to PASI for its AGILA satellites.
In response to Silverio’s letter, Secretary Lagdameo, by letter3 dated July 3, 1996, confirmed the
government’s assignment of Philippine orbital slots 161ºE and 153ºE to PASI for its AGILA
satellites.
PASI thereupon undertook preparations for the launching, operation and management of its
satellites by, among other things, obtaining loans, increasing its capital, conducting negotiations
with its business partners, and making an initial payment of US$ 3.5 million to Aerospatiale, a
French satellite manufacturer.
Michael de Guzman (de Guzman), PASI President and Chief Executive Officer (CEO), later
informed Jesli Lapuz (Lapuz), President and CEO of the Landbank of the Philippines, by letter4 of
December 3, 1996, of the government’s assignment to PASI of orbital slots 161ºE and 153ºE and
requested the bank’s confirmation of its participation in a club loan in the amount of US$ 11
million, the proceeds of which would be applied to PASI’s interim satellite.
It appears that Lapuz sent a copy of De Guzman’s letter to then DOTC Undersecretary Josefina
T. Lichauco, (Lichauco) who, by letter5 of December 5, 1996, wrote Lapuz as follows:
1. Kindly be informed that there is simply no basis for Michael de Guzman to allege that the
DOTC has assigned two (2) slots to PASI. He conveniently neglected to attach as another annex,
in addition to Sec. Lagdameo’s letter of 3 July 1996 (Annex "A") the letter of 28 June (Annex
"B") in response to which the July 3rd letter had been sent to PASI. Annex "B" precisely provides
that one slot (153º E, to which the interim satellite was supposed to migrate) was to be used for
the migration of the Russian satellite in time for the APEC Leaders’ Summit. This particular
endeavor was not successful. The interim satellite "Gorizont" never moved from its orbital
location of 130ºE Longitude. Annex "C" is a letter from an official of the Subic Bay Satellite
Systems Inc., with its attachments, addressed to me stating that as of the 13th of November, no
such voyage to 153ºE orbital slot had been commenced. In fact DHI hid this fact from me, and in
fact stated that Gorizont had already moved and was on its way to 153ºE.
Since this timely migration did not happen in time for the APEC Leaders Meeting on 24
November, this 153ºE Longitude slot can no longer be assigned to PASI.
The other slot 161ºE Longitude is the one that can be made available for PASI’s eventual launch,
in 1998 most likely, in exchange for one free satellite transponder unit utilization, for all
requirements of Government. These have yet to be embodied in a contract between PASI and
the DOTC.
2. I understand from my meeting with DHI/PASI this morning, and from the de Guzman letter you
sent to me, that the latter are still interested in pursuing their "interim satellite project" and are
applying for a loan with your bank. Of course they can always pursue this as a business venture of
DHI/PASI which is their own corporate business decision. The DOTC supports this venture but
they will be getting only one orbital slot for both the Interim Satellite Project and for the Launch
Project. I understand from today’s meeting with them that this is technically feasible.
3. As regards the use of the name "Agila", Mr. de Guzman’s allegation that DHI/PASI has
registered "Agila" as a "corporate alias/trademark" is FALSE. There is no such thing as
registration of a "corporate alias". Nor for that matter can the trade name of a satellite be
registered for just any satellite, where it was the President who chose the name for the first
Philippine satellite in orbit. No one else coined that name but he. He has therefore given the
name "Agila I" to the Mabuhay satellite now in orbit at 144ºE, being the first Philippine satellite
in orbit. He made this announcement in the presence of all the APEC Heads of State just before
the presentation to him of the Manila Action Plan for APEC. (Underscoring supplied)
Lichauco subsequently issued, in December 1997, a Notice of Offer6 for several orbital slots
including 153ºE.
PASI, claiming that the offer was without its knowledge and that it subsequently came to learn
that another company whose identity had not been disclosed had submitted a bid and won the
award for orbital slot 153ºE, filed on January 23, 1998 a complaint7 before the Regional Trial
Court (RTC) of Mandaluyong City against Lichauco and the "Unknown Awardee," for injunction
to enjoin the award of orbital slot 153ºE, declare its nullity, and for damages.
PASI also filed on February 23, 1998 a complaint before the Office of the Ombudsman against
Secretary Josefina Trinidad Lichauco. In his affidavit-complaint, de Guzman charged Lichauco
with gross violation of Section 3(e) of Republic Act No. 3019, otherwise known as the Anti-Graft
and Corrupt Practices Act, as amended, reading:
(e) Causing any undue injury to any party, including the Government, or giving any private party
any unwarranted benefits, advantage or preference in the discharge of his official, administrative
or judicial functions through manifest partiality, evident bad faith or gross inexcusable
negligence. This provision shall apply to officers and employees of officers or government
corporations charged with the grant of licenses or permits or other concessions.
The complaint was docketed as OMB Case No. 0-98-0416. The Evaluation and Preliminary
Investigation Bureau (EPIB) of the Office of the Ombudsman, by Evaluation Report8 dated April
15, 1998, found the existence of a prejudicial question after considering that "the case filed with
the RTC involves facts intimately related to those upon which the criminal prosecution would be
based and that the guilt or the innocence of the accused would necessarily be determined in the
resolution of the issues raised in the civil case." It thus concluded that the filing of the complaint
before the Ombudsman "is premature since the issues involved herein are now subject of
litigation in the case filed with the RTC," and accordingly recommended its dismissal. Then
Ombudsman Aniano A. Desierto approved on April 24, 1998 the recommendation of the EPIB.
PASI moved to reconsider9 the dismissal of the complaint, but was denied by Order10 dated July
17, 1998.
In the meantime, a motion to dismiss the civil case against respondent was denied by the trial
court. On elevation of the order of denial to the Court of Appeals, said court, by Decision dated
February 21, 2000, ordered the dismissal of the case. This Court, by Decision dated May 3, 2006,
ordered the reinstatement of the case, however.11
PASI is now before this Court via petition for review on certiorari, arguing that the Ombudsman
erred in dismissing the complaint.
In issue are 1) whether there exists a prejudicial question and, if in the affirmative, 2) whether the
dismissal of the complaint on that account is in order.
Section 7, Rule 111 of the Rules on Criminal Procedure provides:
Section 7. Elements of prejudicial question. – The elements of a prejudicial question are: (a) the
previously instituted civil action involves an issue similar or intimately related to the issue raised
in the subsequent criminal action, and (b) the resolution of such issue determines whether or not
the criminal action may proceed.
The rationale for the principle of prejudicial question is that although it does not conclusively
resolve the guilt or innocence of the accused, it tests the sufficiency of the allegations in the
complaint or information in order to sustain the further prosecution of the criminal case.12 Hence,
the need for its prior resolution before further proceedings in the criminal action may be had.
PASI concedes that the issues in the civil case are similar or intimately related to the issue raised
in the criminal case. It contends, however, that the resolution of the issues in the civil case is not
determinative of the guilt or innocence of Lichauco, it arguing that even if she is adjudged liable
for damages, it does not necessarily follow that she would be convicted of the crime charged.
To determine the existence of a prejudicial question in the case before the Ombudsman, it is
necessary to examine the elements of Section 3(e) of R.A. 3019 for which Lichauco was charged
and the causes of action in the civil case.
Section 3(e) of R.A. 3019 which was earlier quoted has the following elements:
1. The accused is a public officer discharging administrative or official functions or private
persons charged in conspiracy with them;
2. The public officer committed the prohibited act during the performance of his official duty or
in relation to his public position;
3. The public officer acted with manifest partiality, evident bad faith or gross, inexcusable
negligence; and
4. His action caused undue injury to the Government or any private party, or gave any party any
unwarranted benefit, advantage or preference to such parties.13
The civil case against Lichauco on the other hand involves three causes of action. The first, for
injunction, seeks to enjoin the award of orbital slot 153ºE, the DOTC having previously assigned
the same to PASI; the second, for declaration of nullity of award, seeks to nullify the award given
to the undisclosed bidder for being beyond Lichauco’s authority; and the third, for damages
arising from Lichauco’s questioned acts.
If the award to the undisclosed bidder of orbital slot 153ºE is, in the civil case, declared valid for
being within Lichauco’s scope of authority to thus free her from liability for damages, there
would be no prohibited act to speak of nor would there be basis for undue injury claimed to have
been suffered by petitioner. The finding by the Ombudsman of the existence of a prejudicial
question is thus well-taken.
Respecting the propriety of the dismissal by the Ombudsman of the complaint due to the
pendency of a prejudicial question, PASI argues that since the Rules of Procedure of the Office of
the Ombudsman is silent on the matter, the Rules of Court, specifically Section 6, Rule 111 of the
Rules of Court, which now reads:
SECTION 6. Suspension by reason of prejudicial question. – A petition for suspension of the
criminal action based upon the pendency of a prejudicial question in a civil action may be filed in
the office of the prosecutor or the court conducting the preliminary investigation. When the
criminal action has been filed in court for trial, the petition to suspend shall be filed in the same
criminal action at any time before the prosecution rests. (Underscoring supplied),
applies in a suppletory character.
The Ombudsman, on the other hand, argues that the above-quoted provision of the Rules of
Court applies to cases which are at the preliminary or trial stage and not to those, like the case
subject of the present petition, at the evaluation stage.
The Ombudsman goes on to proffer that at the evaluation stage, the investigating officer may
recommend any of several causes of action including dismissal of the complaint for want of
palpable merit or subjecting the complaint to preliminary investigation, and the evaluation of the
complaint involves the discretion of the investigating officer which this Court cannot interfere
with.
While the evaluation of a complaint involves the discretion of the investigating officer, its
exercise should not be abused14 or wanting in legal basis.
Rule II, Section 2 of the Rules of Procedure of the Office of the Ombudsman reads:
SECTION 2. Evaluation. – Upon evaluating the complaint, the investigating officer shall
recommend whether it may be:
a) dismissed outright for want of palpable merit;
b) referred to respondent for comment;
c) indorsed to the proper government office or agency which has jurisdiction over the case;
d) forwarded to the appropriate office or official for fact-finding investigation;
e) referred for administrative adjudication; or
f) subjected to a preliminary investigation. (Underscoring supplied)
From the above-quoted provision, a complaint at the evaluation stage may be dismissed outright
only for want of palpable merit. Want of palpable merit obviously means that there is no basis for
the charge or charges. If the complaint has prima facie merit, however, the investigating officer
shall recommend the adoption of any of the actions enumerated above from (b) to (f).15
When, in the course of the actions taken by those to whom the complaint is endorsed or
forwarded, a prejudicial question is found to be pending, Section 6, Rule 111 of the Rules of
Court should be applied in a suppletory character.16 As laid down in Yap v. Paras,17 said rule
directs that the proceedings may only be suspended, not dismissed, and that it may be made
only upon petition,and not at the instance of the judge alone or as in this case, the investigating
officer.
To give imprimatur to the Ombudsman’s dismissal of petitioner’s criminal complaint due to
prejudicial question would not only run counter to the provision of Section 6 of Rule 111 of the
Rules of Court. It would sanction the extinguishment of criminal liability, if there be any, through
prescription under Article 89 vis a vis Articles 90 and 91 of the Revised Penal Code which
respectively read:
ART. 89. How criminal liability is totally extinguished. — Criminal liability is totally extinguished:
1. By the death of the convict, as to the personal penalties; and as to pecuniary penalties, liability
therefore is extinguished only when the death of the offender occurs before final judgment;
2. By service of the sentence;
3. By amnesty, which completely extinguishes the penalty and all its effects;
4. By absolute pardon;
5. By prescription of the crime;
6. By prescription of the penalty;
7. By the marriage of the offended woman, as provided in Article 344 of this Code. (Underscoring
supplied)
ART. 90. Prescription of crimes. — Crimes punishable by death, reclusion perpetua or reclusion
temporalshall prescribe in twenty years.
Crimes punishable by other afflictive penalties shall prescribe in fifteen years.
Those punishable by a correctional penalty shall prescribe in ten years; with the exception of
those punishable by arresto mayor, which shall prescribe in five years.
The crime of libel or other similar offenses shall prescribe in one year.
The offenses of oral defamation and slander by deed shall prescribe in six months.
Light offenses prescribe in two months.
When the penalty fixed by law is a compound one, the highest penalty shall be made the basis of
the application of the rules contained in the first, second, and third paragraphs of this article. x x
x
ART. 91. Computation of prescription of offenses. — The period of prescription shall commence
to run from the day on which the crime is discovered by the offended party, the authorities, or
their agents, and shall be interrupted by the filing of the complaint or information, and shall
commence to run again when such proceedings terminate without the accused being convicted
or acquitted, or are unjustifiably stopped for any reason not imputable to him.
x x x x (Emphasis and underscoring supplied)
WHEREFORE, the Order dated July 17, 1998 of respondent Ombudsman dismissing OMB Case
No. 0-98-0416 against respondent then Secretary Josefina Trinidad Lichauco is SET ASIDE.
The Ombudsman is ORDERED to REINSTATE to its docket for further proceedings, in line with
the foregoing ratiocination, OMB Case No. 0-98-0416.
SO ORDERED

G.R. No. 159186 June 5, 2009


JESSE Y. YAP, Petitioner,
vs.
HON. MONICO G. CABALES, Presiding Judge, Regional Trial Court, Branch 35, General Santos
City; MUNICIPAL TRIAL COURT, Branch 1, General Santos City; COURT OF APPEALS, PEOPLE
OF THE PHILIPPINES, JOVITA DIMALANTA and MERGYL MIRABUENO, Respondents.
DECISION
PERALTA, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court with prayer for the
issuance of a writ of preliminary injunction and/or issuance of status quo order seeking to annul
and set aside the Resolution1 of the Court of Appeals (CA) dated July 17, 2003 denying
petitioner's motion for reconsideration of the Decision2 dated April 30, 2003 in CA-G.R. SP No.
68250.
The facts of the case are as follows:
Petitioner Jesse Y. Yap and his spouse Bessie Yap are engaged in the real estate business
through their company Primetown Property Group.
Sometime in 1996, petitioner purchased several real properties from a certain Evelyn Te (Evelyn).
In consideration of said purchases, petitioner issued several Bank of the Philippine Islands (BPI)
postdated checks to Evelyn. Thereafter, spouses Orlando and Mergyl Mirabueno and spouses
Charlie and Jovita Dimalanta, rediscounted the checks from Evelyn.
In the beginning, the first few checks were honored by the bank, but in the early part of 1997,
when the remaining checks were deposited with the drawee bank, they were dishonored for the
reason that the "Account is Closed." Demands were made by Spouses Mirabueno and Spouses
Dimalanta to the petitioner to make good the checks. Despite this, however, the latter failed to
pay the amounts represented by the said checks.
On December 8, 1997, Spouses Mirabueno filed a civil action for collection of sum of money,
damages and attorney's fee with prayer for the issuance of a writ of preliminary attachment
against petitioner before the Regional Trial Court (RTC) of General Santos City, docketed as Civil
Case No. 6231.3 On December 15, 1997, Spouses Dimalanta followed suit and instituted a similar
action, which was docketed as Civil Case No. 6238.4
Subsequently, on various dates, the Office of the City Prosecutor of General Santos City filed
several informations for violation of Batas Pambansa Bilang (B.P. Blg.) 22 against the petitioner
with the Municipal Trial Court in Cities (MTCC), General Santos City. The criminal complaints
were docketed as Criminal Case Nos. 34873, 34874, 34862 to 34869, and Criminal Case No.
35522-I.5
In the criminal cases, petitioner filed separate motions to suspend proceedings on account of the
existence of a prejudicial question and motion to exclude the private prosecutor from
participating in the proceedings.6 Petitioner prayed that the proceedings in the criminal cases be
suspended until the civil cases pending before the RTC were finally resolved.
The MTCC, in its Orders7 dated June 21, 2000 and July 4, 2000, denied the motions for lack of
merit. Petitioner filed a Partial Motion for Reconsideration8 relative to Criminal Case Nos. 34873,
34874, 34862 to 34869 and a Motion for Reconsideration of the Part of the Order Denying the
Motion to Suspend Proceedings on Account of the Existence of a Prejudicial Question relative to
Criminal Case No. 35522-I.9 The subsequent motions were denied in the Order10 dated October
18, 2000.
Aggrieved, petitioner filed a Petition for Certiorari with a Prayer for the Issuance of a Writ of
Preliminary Injunction11before the RTC, docketed as SPL. Civil Case No. 539, imputing grave
abuse of discretion on the part of the MTCC Judge. On July 2, 2001, the RTC issued an Order12
denying the petition.
Petitioner then filed a Motion for Reconsideration,13 which was denied in an Order dated
October 18, 2001.14
Thereafter, petitioner filed with the CA a Petition for Certiorari Prohibition and Mandamus with
Urgent Prayer for the Issuance of Status Quo Order and Writ of Preliminary Injunction,15
docketed as CA-G.R. SP No. 68250.
On April 30, 2003, the CA rendered a Decision16 dismissing the petition for lack of merit. The CA
opined that Civil Case Nos. 6231 and 6238 did not pose a prejudicial question to the prosecution
of the petitioner for violation of B.P. Blg. 22.
The CA ruled:
In the instant case, a careful perusal of Civil Cases Nos. 6231 and 6238 reveals that the issue
involved therein is not the validity of the sale as incorrectly pointed out by the petitioner, but it
is, whether or not the complainants therein are entitled to collect from the petitioner the sum or
the value of the checks which they have rediscounted from Evelyn Te. It behooves this Court to
state that the sale and the rediscounting of the checks are two transactions, separate and distinct
from each other. It so happened that in the subject civil cases it is not the sale that is in question,
but rather the rediscounting of the checks. Therefore, petitioner's contention that the main issue
involved in said civil cases is the validity of the sale stands on hollow ground. Furthermore, if it is
indeed the validity of the sale that is contested in the subject civil cases, then, We cannot fathom
why the petitioner never contested such sale by filing an action for the annulment thereof or at
least invoked or prayed in his answer that the sale be declared null and void. Accordingly, even if
Civil Cases Nos. 6231 and 6238 are tried and the resolution of the issues therein is had, it cannot
be deduced therefrom that the petitioner cannot be held liable anymore for violation of B.P. Blg.
22.17
Petitioner filed a Motion for Reconsideration,18 which was denied in the Order19 dated July 17,
2003.
Hence, the petition assigning the following errors:
1. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THERE IS NO PREJUDICIAL
QUESTION IN THE CIVIL CASES (FOR COLLECTION OF SUMS OF MONEY INSTITUTED BY
PRIVATE RESPONDENTS OVER CHECKS ISSUED BY THE PETITIONER, CIVIL CASE NOS. 6238
AND 6231) THAT WOULD WARRANT SUSPENSION OF THE CRIMINAL CASES (CASE NO.
35522-1, FOR VIOLATION OF B.P. 22, SUBJECT OF WHICH ARE THE VERY SAME CHECKS).
2. THE HONORABLE COURT OF APPEALS ERRED IN NOT GRANTING THE PRAYER FOR THE
ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION AND/OR STATUS QUO ORDER.20
The main contention of the petitioner is that a prejudicial question, as defined by law and
jurisprudence, exists in the present case. It is the petitioner's assertion that Civil Case Nos. 6231
and 6238 for collection of sum of money and damages were filed ahead of the criminal cases for
violation of B.P. Blg. 22. He further alleged that, in the pending civil cases, the issue as to
whether private respondents are entitled to collect from the petitioner despite the lack of
consideration, is an issue that is a logical antecedent to the criminal cases for violation of B.P.
Blg. 22. For if the court rules that there is no valid consideration for the check's issuance, as
petitioner contends, then it necessarily follows that he could not also be held liable for violation
of B.P. Blg. 22.
Petitioner further avers that B.P. Blg. 22 specifically requires, among other elements, that the
check should have been issued for account or for value. There must be a valid consideration;
otherwise, no violation of the said law could be rightfully pursued. Petitioner said that the reason
for the dishonor of the checks was his order to the drawee bank to stop payment and to close his
account in order to avoid necessary penalty from the bank. He made this order due to the failure
of Evelyn to deliver to him the titles to the purchased properties to him.
On the other hand, the Office of the Solicitor General (OSG) contends that there is no prejudicial
question in Civil Case Nos. 6231 and 6238 which would warrant the suspension of the
proceedings in the criminal cases for violation of B.P. Blg. 22 against the petitioner. The issue in
the civil cases is not the validity of the sale between the petitioner and Evelyn, but whether the
complainants therein are entitled to damages arising from the checks. These checks were issued
by the petitioner in favor of Evelyn, who, thereafter, negotiated the same checks to private
complainants. The checks were subsequently dishonored due to insufficiency of funds. The OSG
maintains that the resolution of such issue has absolutely no bearing on the issue of whether
petitioner may be held liable for violation of B.P. Blg. 22.21
The present case hinges on the determination of whether there exists a prejudicial question that
necessitates the suspension of the proceedings in the MTCC.
We find that there is none and, thus, we resolve to deny the petition.
A prejudicial question generally exists in a situation where a civil action and a criminal action are
both pending, and there exists in the former an issue that must be preemptively resolved before
the latter may proceed, because howsoever the issue raised in the civil action is resolved would
be determinative juris et de jure of the guilt or innocence of the accused in the criminal case. The
rationale behind the principle of prejudicial question is to avoid two conflicting decisions. It has
two essential elements: (i) the civil action involves an issue similar or intimately related to the
issue raised in the criminal action; and (ii) the resolution of such issue determines whether or not
the criminal action may proceed.22
If both civil and criminal cases have similar issues, or the issue in one is intimately related to the
issues raised in the other, then a prejudicial question would likely exist, provided the other
element or characteristic is satisfied. It must appear not only that the civil case involves the same
facts upon which the criminal prosecution would be based, but also that the resolution of the
issues raised in the civil action would be necessarily determinative of the guilt or innocence of the
accused. If the resolution of the issue in the civil action will not determine the criminal
responsibility of the accused in the criminal action based on the same facts, or if there is no
necessity that the civil case be determined first before taking up the criminal case, the civil case
does not involve a prejudicial question.23 Neither is there a prejudicial question if the civil and the
criminal action can, according to law, proceed independently of each other.24
The issue in the criminal cases is whether the petitioner is guilty of violating B.P. Blg. 22, while in
the civil case, it is whether the private respondents are entitled to collect from the petitioner the
sum or the value of the checks that they have rediscounted from Evelyn.lavvphil
The resolution of the issue raised in the civil action is not determinative of the guilt or innocence
of the accused in the criminal cases against him, and there is no necessity that the civil case be
determined first before taking up the criminal cases.
In the aforementioned civil actions, even if petitioner is declared not liable for the payment of the
value of the checks and damages, he cannot be adjudged free from criminal liability for violation
of B.P. Blg. 22. The mere issuance of worthless checks with knowledge of the insufficiency of
funds to support the checks is in itself an offense.25
In Jose v. Suarez,26 the prejudicial question under determination was whether the daily interest
rate of 5% was void, such that the checks issued by respondents to cover said interest were
likewise void for being contra bonos mores, and thus the cases for B.P. Blg. 22 will no longer
prosper. In resolving the issue, We ruled that "whether or not the interest rate imposed by
petitioners is eventually declared void for being contra bonos mores will not affect the outcome
of the BP Blg. 22 cases because what will ultimately be penalized is the mere issuance of
bouncing checks. In fact, the primordial question posed before the court hearing the B.P. Blg. 22
cases is whether the law has been breached; that is, if a bouncing check has been issued."
Further, We held in Ricaforte v. Jurado,27 that:
The gravamen of the offense punished by B.P. Blg. 22 is the act of making and issuing a
worthless check; that is, a check that is dishonored upon its presentation for payment. In Lozano
v. Martinez, we have declared that it is not the non-payment of an obligation which the law
punishes. The law is not intended or designed to coerce a debtor to pay his debt. The thrust of
the law is to prohibit, under pain of penal sanctions, the making and circulation of worthless
checks. Because of its deleterious effects on the public interest, the practice is proscribed by the
law. The law punishes the act not as an offense against property, but an offense against public
order. In People v. Nitafan, we said that a check issued as an evidence of debt - though not
intended to be presented for payment - has the same effect as an ordinary check and would fall
within the ambit of B.P. Blg. 22.
xxxx
x x x The mere act of issuing a worthless check - whether as a deposit, as a guarantee or even as
evidence of pre-existing debt - is malum prohibitum.
To determine the reason for which checks are issued, or the terms and conditions for their
issuance, will greatly erode the faith the public reposes in the stability and commercial value of
checks as currency substitutes, and bring about havoc in trade and in banking communities. So
what the law punishes is the issuance of a bouncing check and not the purpose for which it was
issued or the terms and conditions relating to its issuance. The mere act of issuing a worthless
check is malum prohibitum.28
Moreover, petitioner's reliance on Ras v. Rasul29 is misplaced. The case of Ras involves a
complaint for nullification of a deed of sale on the ground of an alleged double sale. While the
civil case was pending, an information for estafa was filed against Ras (the defendant in the civil
case) arising from the same alleged double sale, subject matter of the civil complaint. The Court
ruled that there was a prejudicial question considering that the defense in the civil case was
based on the very same facts that would be determinative of the guilt or innocence of the
accused in the estafa case.
The instant case is different from Ras, inasmuch as the determination of whether the petitioner is
liable to pay the private respondents the value of the checks and damages, will not affect the
guilt or innocence of the petitioner because the material question in the criminal cases is whether
petitioner had issued bad checks, regardless of the purpose or condition of its issuance.
Guided by the following legal precepts, it is clear that the determination of the issues involved in
Civil Case Nos. 6231 and 6238 for collection of sum of money and damages is irrelevant to the
guilt or innocence of the petitioner in the criminal cases for violation of B.P. Blg. 22.
In addition, petitioner's claim of lack of consideration may be raised as a defense during the trial
of the criminal cases against him. The validity and merits of a party’s defense and accusation, as
well as the admissibility and weight of testimonies and evidence brought before the court, are
better ventilated during trial proper.
Precisely, the reason why a state has courts of law is to ascertain the respective rights of the
parties, to examine and to put to test all their respective allegations and evidence through a well
designed machinery termed "trial."Thus, all the defenses available to the accused should be
invoked in the trial of the criminal cases. This court is not the proper forum that should ascertain
the facts and decide the case for violation of B.P. Blg. 22 filed against the petitioner.
In fine, the CA committed no reversible error in affirming the decision of the RTC.
WHEREFORE, the petition is DENIED and the Decision dated April 30, 2003 and the Resolution
dated July 17, 2003 of the Court of Appeals in CA-G.R. SP No. 68250 are AFFIRMED.
SO ORDERED.

G.R. No. 184861 June 30, 2009

DREAMWORK CONSTRUCTION, INC., Petitioner,


vs.
CLEOFE S. JANIOLA and HON. ARTHUR A. FAMINI, Respondents.

DECISION

VELASCO, JR., J.:

The Case

Petitioner Dreamwork Construction, Inc. seeks the reversal of the August 26, 2008 Decision1 in
SCA No. 08-0005 of the Regional Trial Court (RTC), Branch 253 in Las Piñas City. The Decision
affirmed the Orders dated October 16, 20072 and March 12, 20083 in Criminal Case Nos. 55554-
61 issued by the Metropolitan Trial Court (MTC), Branch 79 in Las Piñas City.

The Facts

On October 18, 2004, petitioner, through its President, Roberto S. Concepcion, and Vice-
President for Finance and Marketing, Normandy P. Amora, filed a Complaint Affidavit dated
October 5, 20044 for violation of Batas Pambansa Bilang 22 (BP 22) against private respondent
Cleofe S. Janiola with the Office of the City Prosecutor of Las Piñas City. The case was docketed
as I.S. No. 04-2526-33. Correspondingly, petitioner filed a criminal information for violation of BP
22 against private respondent with the MTC on February 2, 2005 docketed as Criminal Case Nos.
55554-61, entitled People of the Philippines v. Cleofe S. Janiola.

On September 20, 2006, private respondent, joined by her husband, instituted a civil complaint
against petitioner by filing a Complaint dated August 20065 for the rescission of an alleged
construction agreement between the parties, as well as for damages. The case was filed with the
RTC, Branch 197 in Las Piñas City and docketed as Civil Case No. LP-06-0197. Notably, the
checks, subject of the criminal cases before the MTC, were issued in consideration of the
construction agreement.

Thereafter, on July 25, 2007, private respondent filed a Motion to Suspend Proceedings dated
July 24, 20076 in Criminal Case Nos. 55554-61, alleging that the civil and criminal cases involved
facts and issues similar or intimately related such that in the resolution of the issues in the civil
case, the guilt or innocence of the accused would necessarily be determined. In other words,
private respondent claimed that the civil case posed a prejudicial question as against the criminal
cases.

Petitioner opposed the suspension of the proceedings in the criminal cases in an undated
Comment/Opposition to Accused’s Motion to Suspend Proceedings based on Prejudicial
Question7 on the grounds that: (1) there is no prejudicial question in this case as the rescission of
the contract upon which the bouncing checks were issued is a separate and distinct issue from
the issue of whether private respondent violated BP 22; and (2) Section 7, Rule 111 of the Rules
of Court states that one of the elements of a prejudicial question is that "the previously
instituted civil action involves an issue similar or intimately related to the issue raised in the
subsequent criminal action"; thus, this element is missing in this case, the criminal case having
preceded the civil case.

Later, the MTC issued its Order dated October 16, 2007, granting the Motion to Suspend
Proceedings, and reasoned that:

Should the trial court declare the rescission of contract and the nullification of the checks issued
as the same are without consideration, then the instant criminal cases for alleged violation of BP
22 must be dismissed. The belated filing of the civil case by the herein accused did not detract
from the correctness of her cause, since a motion for suspension of a criminal action may be filed
at any time before the prosecution rests (Section 6, Rule 111, Revised Rules of Court).8

In an Order dated March 12, 2008,9 the MTC denied petitioner’s Motion for Reconsideration
dated November 29, 2007.

Petitioner appealed the Orders to the RTC with a Petition dated May 13, 2008. Thereafter, the
RTC issued the assailed decision dated August 26, 2008, denying the petition. On the issue of
the existence of a prejudicial question, the RTC ruled:

Additionally, it must be stressed that the requirement of a "previously" filed civil case is intended
merely to obviate delays in the conduct of the criminal proceedings. Incidentally, no clear
evidence of any intent to delay by private respondent was shown. The criminal proceedings are
still in their initial stages when the civil action was instituted. And, the fact that the civil action
was filed after the criminal action was instituted does not render the issues in the civil action any
less prejudicial in character.10

Hence, we have this petition under Rule 45.

The Issue

WHETHER OR NOT THE COURT A QUO SERIOUSLY ERRED IN NOT PERCEIVING GRAVE
ABUSE OF DISCRETION ON THE PART OF THE INFERIOR COURT, WHEN THE LATTER RULED
TO SUSPEND PROCEEDINGS IN CRIM. CASE NOS. 55554-61 ON THE BASIS OF "PREJUDICIAL
QUESTION" IN CIVIL CASE NO. LP-06-0197.11

The Court’s Ruling

This petition must be granted.

The Civil Action Must Precede the Filing of the

Criminal Action for a Prejudicial Question to Exist

Under the 1985 Rules on Criminal Procedure, as amended by Supreme Court Resolutions dated
June 17, 1988 and July 7, 1988, the elements of a prejudicial question are contained in Rule 111,
Sec. 5, which states:

SEC. 5. Elements of prejudicial question. — The two (2) essential elements of a prejudicial
question are: (a) the civil action involves an issue similar or intimately related to the issue raised in
the criminal action; and (b) the resolution of such issue determines whether or not the criminal
action may proceed.

Thus, the Court has held in numerous cases12 that the elements of a prejudicial question, as
stated in the above-quoted provision and in Beltran v. People,13 are:

The rationale behind the principle of prejudicial question is to avoid two conflicting decisions. It
has two essential elements: (a) the civil action involves an issue similar or intimately related to the
issue raised in the criminal action; and (b) the resolution of such issue determines whether or not
the criminal action may proceed.

On December 1, 2000, the 2000 Rules on Criminal Procedure, however, became effective and the
above provision was amended by Sec. 7 of Rule 111, which applies here and now provides:

SEC. 7. Elements of prejudicial question.—The elements of a prejudicial question are: (a) the
previously instituted civil action involves an issue similar or intimately related to the issue raised
in the subsequent criminal action, and (b) the resolution of such issue determines whether or not
the criminal action may proceed. (Emphasis supplied.)

Petitioner interprets Sec. 7(a) to mean that in order for a civil case to create a prejudicial question
and, thus, suspend a criminal case, it must first be established that the civil case was filed
previous to the filing of the criminal case. This, petitioner argues, is specifically to guard against
the situation wherein a party would belatedly file a civil action that is related to a pending
criminal action in order to delay the proceedings in the latter.

On the other hand, private respondent cites Article 36 of the Civil Code which provides:

Art. 36. Pre-judicial questions which must be decided before any criminal prosecution may be
instituted or may proceed, shall be governed by rules of court which the Supreme Court shall
promulgate and which shall not be in conflict with the provisions of this Code. (Emphasis
supplied.)

Private respondent argues that the phrase "before any criminal prosecution may be instituted or
may proceed" must be interpreted to mean that a prejudicial question exists when the civil
action is filed either before the institution of the criminal action or during the pendency of the
criminal action. Private respondent concludes that there is an apparent conflict in the provisions
of the Rules of Court and the Civil Code in that the latter considers a civil case to have presented
a prejudicial question even if the criminal case preceded the filing of the civil case.

We cannot agree with private respondent.

First off, it is a basic precept in statutory construction that a "change in phraseology by


amendment of a provision of law indicates a legislative intent to change the meaning of the
provision from that it originally had."14 In the instant case, the phrase, "previously instituted,"
was inserted to qualify the nature of the civil action involved in a prejudicial question in relation
to the criminal action. This interpretation is further buttressed by the insertion of "subsequent"
directly before the term criminal action. There is no other logical explanation for the
amendments except to qualify the relationship of the civil and criminal actions, that the civil
action must precede the criminal action.

Thus, this Court ruled in Torres v. Garchitorena15 that:

Even if we ignored petitioners’ procedural lapse and resolved their petition on the merits, we
hold that Sandiganbayan did not abuse its discretion amounting to excess or lack of jurisdiction
in denying their omnibus motion for the suspension of the proceedings pending final judgment in
Civil Case No. 7160. Section 6, Rule lll of the Rules of Criminal Procedure, as amended, reads:

Sec. 6. Suspension by reason of prejudicial question. - A petition for suspension of the criminal
action based upon the pendency of a prejudicial question in a civil action may be filed in the
office of the prosecutor or the court conducting the preliminary investigation. When the criminal
action has been filed in court for trial, the petition to suspend shall be filed in the same criminal
action at any time before the prosecution rests.

Sec. 7. Elements of prejudicial question. - The elements of a prejudicial question are: (a) the
previously instituted civil action involves an issue similar or intimately related to the issue raised
in the subsequent criminal action, and (b) the resolution of such issue determines whether or not
the criminal action may proceed.
Under the amendment, a prejudicial question is understood in law as that which must precede
the criminal action and which requires a decision before a final judgment can be rendered in the
criminal action with which said question is closely connected. The civil action must be instituted
prior to the institution of the criminal action. In this case, the Information was filed with the
Sandiganbayan ahead of the complaint in Civil Case No. 7160 filed by the State with the RTC in
Civil Case No. 7160. Thus, no prejudicial question exists. (Emphasis supplied.)

Additionally, it is a principle in statutory construction that "a statute should be construed not
only to be consistent with itself but also to harmonize with other laws on the same subject
matter, as to form a complete, coherent and intelligible system."16 This principle is consistent
with the maxim, interpretare et concordare leges legibus est optimus interpretandi modus or
every statute must be so construed and harmonized with other statutes as to form a uniform
system of jurisprudence.171 a vv p h i l

In other words, every effort must be made to harmonize seemingly conflicting laws. It is only
when harmonization is impossible that resort must be made to choosing which law to apply.

In the instant case, Art. 36 of the Civil Code and Sec. 7 of Rule 111 of the Rules of Court are
susceptible of an interpretation that would harmonize both provisions of law. The phrase
"previously instituted civil action" in Sec. 7 of Rule 111 is plainly worded and is not susceptible of
alternative interpretations. The clause "before any criminal prosecution may be instituted or may
proceed" in Art. 36 of the Civil Code may, however, be interpreted to mean that the motion to
suspend the criminal action may be filed during the preliminary investigation with the public
prosecutor or court conducting the investigation, or during the trial with the court hearing the
case.

This interpretation would harmonize Art. 36 of the Civil Code with Sec. 7 of Rule 111 of the Rules
of Court but also with Sec. 6 of Rule 111 of the Civil Code, which provides for the situations when
the motion to suspend the criminal action during the preliminary investigation or during the trial
may be filed. Sec. 6 provides:

SEC. 6. Suspension by reason of prejudicial question.—A petition for suspension of the criminal
action based upon the pendency of a prejudicial question in a civil action may be filed in the
office of the prosecutor or the court conducting the preliminary investigation. When the criminal
action has been filed in court for trial, the petition to suspend shall be filed in the same criminal
action at any time before the prosecution rests.

Thus, under the principles of statutory construction, it is this interpretation of Art. 36 of the Civil
Code that should govern in order to give effect to all the relevant provisions of law.

It bears pointing out that the circumstances present in the instant case indicate that the filing of
the civil action and the subsequent move to suspend the criminal proceedings by reason of the
presence of a prejudicial question were a mere afterthought and instituted to delay the criminal
proceedings.

In Sabandal v. Tongco,18 we found no prejudicial question existed involving a civil action for
specific performance, overpayment, and damages, and a criminal complaint for BP 22, as the
resolution of the civil action would not determine the guilt or innocence of the accused in the
criminal case. In resolving the case, we said:

Furthermore, the peculiar circumstances of the case clearly indicate that the filing of the civil case
was a ploy to delay the resolution of the criminal cases. Petitioner filed the civil case three years
after the institution of the criminal charges against him. Apparently, the civil action was instituted
as an afterthought to delay the proceedings in the criminal cases.19

Here, the civil case was filed two (2) years after the institution of the criminal complaint and from
the time that private respondent allegedly withdrew its equipment from the job site. Also, it is
worth noting that the civil case was instituted more than two and a half (2 ½) years from the time
that private respondent allegedly stopped construction of the proposed building for no valid
reason. More importantly, the civil case praying for the rescission of the construction agreement
for lack of consideration was filed more than three (3) years from the execution of the
construction agreement.

Evidently, as in Sabandal, the circumstances surrounding the filing of the cases involved here
show that the filing of the civil action was a mere afterthought on the part of private respondent
and interposed for delay. And as correctly argued by petitioner, it is this scenario that Sec. 7 of
Rule 111 of the Rules of Court seeks to prevent. Thus, private respondent’s positions cannot be
left to stand.

The Resolution of the Civil Case Is Not


Determinative of the Prosecution of the Criminal Action

In any event, even if the civil case here was instituted prior to the criminal action, there is, still, no
prejudicial question to speak of that would justify the suspension of the proceedings in the
criminal case.

To reiterate, the elements of a prejudicial question under Sec. 7 of Rule 111 of the Rules of Court
are: (1) the previously instituted civil action involves an issue similar or intimately related to the
issue raised in the subsequent criminal action; and (2) the resolution of such issue determines
whether or not the criminal action may proceed.

Petitioner argues that the second element of a prejudicial question, as provided in Sec. 7 of Rule
111 of the Rules, is absent in this case. Thus, such rule cannot apply to the present controversy.

Private respondent, on the other hand, claims that if the construction agreement between the
parties is declared null and void for want of consideration, the checks issued in consideration of
such contract would become mere scraps of paper and cannot be the basis of a criminal
prosecution.

We find for petitioner.

It must be remembered that the elements of the crime punishable under BP 22 are as follows:

(1) the making, drawing, and issuance of any check to apply for account or for value;
(2) the knowledge of the maker, drawer, or issuer that at the time of issue there are no sufficient
funds in or credit with the drawee bank for the payment of such check in full upon its
presentment; and

(3) the subsequent dishonor of the check by the drawee bank for insufficiency of funds or credit,
or dishonor for the same reason had not the drawer, without any valid cause, ordered the bank
to stop payment.20

Undeniably, the fact that there exists a valid contract or agreement to support the issuance of
the check/s or that the checks were issued for valuable consideration does not make up the
elements of the crime. Thus, this Court has held in a long line of cases21 that the agreement
surrounding the issuance of dishonored checks is irrelevant to the prosecution for violation of BP
22. In Mejia v. People,22 we ruled:

It must be emphasized that the gravamen of the offense charge is the issuance of a bad check.
The purpose for which the check was issued, the terms and conditions relating to its issuance, or
any agreement surrounding such issuance are irrelevant to the prosecution and conviction of
petitioner. To determine the reason for which checks are issued, or the terms and conditions for
their issuance, will greatly erode the faith the public reposes in the stability and commercial value
of checks as currency substitutes, and bring havoc in trade and in banking communities. The clear
intention of the framers of B.P. 22 is to make the mere act of issuing a worthless check malum
prohibitum.

Lee v. Court of Appeals23 is even more poignant. In that case, we ruled that the issue of lack of
valuable consideration for the issuance of checks which were later on dishonored for insufficient
funds is immaterial to the success of a prosecution for violation of BP 22, to wit:

Third issue. Whether or not the check was issued on account or for value.

Petitioner’s claim is not feasible. We have held that upon issuance of a check, in the absence of
evidence to the contrary, it is presumed that the same was issued for valuable consideration.
Valuable consideration, in turn, may consist either in some right, interest, profit or benefit
accruing to the party who makes the contract, or some forbearance, detriment, loss or some
responsibility, to act, or labor, or service given, suffered or undertaken by the other side. It is an
obligation to do, or not to do in favor of the party who makes the contract, such as the maker or
indorser.

In this case, petitioner himself testified that he signed several checks in blank, the subject check
included, in exchange for 2.5% interest from the proceeds of loans that will be made from said
account. This is a valuable consideration for which the check was issued. That there was neither a
pre-existing obligation nor an obligation incurred on the part of petitioner when the subject
check was given by Bautista to private complainant on July 24, 1993 because petitioner was no
longer connected with Unlad or Bautista starting July 1989, cannot be given merit since, as
earlier discussed, petitioner failed to adequately prove that he has severed his relationship with
Bautista or Unlad.
At any rate, we have held that what the law punishes is the mere act of issuing a bouncing check,
not the purpose for which it was issued nor the terms and conditions relating to its issuance. This
is because the thrust of the law is to prohibit the making of worthless checks and putting them
into circulation.24 (Emphasis supplied.)

Verily, even if the trial court in the civil case declares that the construction agreement between
the parties is void for lack of consideration, this would not affect the prosecution of private
respondent in the criminal case. The fact of the matter is that private respondent indeed issued
checks which were subsequently dishonored for insufficient funds. It is this fact that is subject of
prosecution under BP 22.lawphil.net

Therefore, it is clear that the second element required for the existence of a prejudicial question,
that the resolution of the issue in the civil action would determine whether the criminal action
may proceed, is absent in the instant case. Thus, no prejudicial question exists and the rules on it
are inapplicable to the case before us.

WHEREFORE, we GRANT this petition. We hereby REVERSE and SET ASIDE the August 26, 2008
Decision in SCA No. 08-0005 of the RTC, Branch 253 in Las Piñas City and the Orders dated
October 16, 2007 and March 12, 2008 in Criminal Case Nos. 55554-61 of the MTC, Branch 79 in
Las Piñas City. We order the MTC to continue with the proceedings in Criminal Case Nos. 55554-
61 with dispatch.

No costs.

SO ORDERED.

JOSELITO R. PIMENTEL, G.R. No. 172060

Petitioner,

Present:

CARPIO, J., Chairperson,

- versus - PERALTA,

BERSAMIN,*

ABAD, and

VILLARAMA, JR.,** JJ.

MARIA CHRYSANTINE
L. PIMENTEL and PEOPLE Promulgated:

OF THE PHILIPPINES,

Respondents. September 13, 2010

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for review[1] assailing the Decision[2] of the Court of Appeals,
promulgated on 20 March 2006, in CA-G.R. SP No. 91867.

The Antecedent Facts

The facts are stated in the Court of Appeals decision:

On 25 October 2004, Maria Chrysantine Pimentel y Lacap (private respondent) filed an action for
frustrated parricide against Joselito R. Pimentel (petitioner), docketed as Criminal Case No. Q-
04-130415, before the Regional Trial Court of Quezon City, which was raffled to Branch 223 (RTC
Quezon City).

On 7 February 2005, petitioner received summons to appear before the Regional Trial Court of
Antipolo City, Branch 72 (RTC Antipolo) for the pre-trial and trial of Civil Case No. 04-7392 (Maria
Chrysantine Lorenza L. Pimentel v. Joselito Pimentel) for Declaration of Nullity of Marriage under
Section 36 of the Family Code on the ground of psychological incapacity.
On 11 February 2005, petitioner filed an urgent motion to suspend the proceedings before the
RTC Quezon City on the ground of the existence of a prejudicial question. Petitioner asserted
that since the relationship between the offender and the victim is a key element in parricide, the
outcome of Civil Case No. 04-7392 would have a bearing in the criminal case filed against him
before the RTC Quezon City.

The Decision of the Trial Court

The RTC Quezon City issued an Order dated 13 May 2005[3] holding that the pendency of the
case before the RTC Antipolo is not a prejudicial question that warrants the suspension of the
criminal case before it. The RTC Quezon City held that the issues in Criminal Case No. Q-04-
130415 are the injuries sustained by respondent and whether the case could be tried even if the
validity of petitioners marriage with respondent is in question. The RTC Quezon City ruled:

WHEREFORE, on the basis of the foregoing, the Motion to Suspend Proceedings On the
[Ground] of the Existence of a Prejudicial Question is, for lack of merit, DENIED.

SO ORDERED.[4]

Petitioner filed a motion for reconsideration. In its 22 August 2005 Order,[5] the RTC Quezon
City denied the motion.

Petitioner filed a petition for certiorari with application for a writ of preliminary injunction and/or
temporary restraining order before the Court of Appeals, assailing the 13 May 2005 and 22
August 2005 Orders of the RTC Quezon City.

The Decision of the Court of Appeals


In its 20 March 2006 Decision, the Court of Appeals dismissed the petition. The Court of Appeals
ruled that in the criminal case for frustrated parricide, the issue is whether the offender
commenced the commission of the crime of parricide directly by overt acts and did not perform
all the acts of execution by reason of some cause or accident other than his own spontaneous
desistance. On the other hand, the issue in the civil action for annulment of marriage is whether
petitioner is psychologically incapacitated to comply with the essential marital obligations. The
Court of Appeals ruled that even if the marriage between petitioner and respondent would be
declared void, it would be immaterial to the criminal case because prior to the declaration of
nullity, the alleged acts constituting the crime of frustrated parricide had already been
committed. The Court of Appeals ruled that all that is required for the charge of frustrated
parricide is that at the time of the commission of the crime, the marriage is still subsisting.

Petitioner filed a petition for review before this Court assailing the Court of Appeals decision.

The Issue

The only issue in this case is whether the resolution of the action for annulment of marriage is a
prejudicial question that warrants the suspension of the criminal case for frustrated parricide
against petitioner.

The Ruling of this Court

The petition has no merit.

Civil Case Must be Instituted

Before the Criminal Case

Section 7, Rule 111 of the 2000 Rules on Criminal Procedure[6] provides:


Section 7. Elements of Prejudicial Question. - The elements of a prejudicial question are: (a) the
previously instituted civil action involves an issue similar or intimately related to the issue raised
in the subsequent criminal action and (b) the resolution of such issue determines whether or not
the criminal action may proceed.

The rule is clear that the civil action must be instituted first before the filing of the criminal action.
In this case, the Information[7] for Frustrated Parricide was dated 30 August 2004. It was raffled
to RTC Quezon City on 25 October 2004 as per the stamped date of receipt on the Information.
The RTC Quezon City set Criminal Case No. Q-04-130415 for pre-trial and trial on 14 February
2005. Petitioner was served summons in Civil Case No. 04-7392 on 7 February 2005.[8]
Respondents petition[9] in Civil Case No. 04-7392 was dated 4 November 2004 and was filed on
5 November 2004. Clearly, the civil case for annulment was filed after the filing of the criminal
case for frustrated parricide. As such, the requirement of Section 7, Rule 111 of the 2000 Rules
on Criminal Procedure was not met since the civil action was filed subsequent to the filing of the
criminal action.

Annulment of Marriage is not a Prejudicial Question

in Criminal Case for Parricide

Further, the resolution of the civil action is not a prejudicial question that would warrant the
suspension of the criminal action.

There is a prejudicial question when a civil action and a criminal action are both pending, and
there exists in the civil action an issue which must be preemptively resolved before the criminal
action may proceed because howsoever the issue raised in the civil action is resolved would be
determinative of the guilt or innocence of the accused in the criminal case.[10] A prejudicial
question is defined as:

x x x one that arises in a case the resolution of which is a logical antecedent of the issue involved
therein, and the cognizance of which pertains to another tribunal. It is a question based on a fact
distinct and separate from the crime but so intimately connected with it that it determines the
guilt or innocence of the accused, and for it to suspend the criminal action, it must appear not
only that said case involves facts intimately related to those upon which the criminal prosecution
would be based but also that in the resolution of the issue or issues raised in the civil case, the
guilt or innocence of the accused would necessarily be determined.[11]

The relationship between the offender and the victim is a key element in the crime of
parricide,[12] which punishes any person who shall kill his father, mother, or child, whether
legitimate or illegitimate, or any of his ascendants or descendants, or his spouse.[13] The
relationship between the offender and the victim distinguishes the crime of parricide from
murder[14] or homicide.[15] However, the issue in the annulment of marriage is not similar or
intimately related to the issue in the criminal case for parricide. Further, the relationship between
the offender and the victim is not determinative of the guilt or innocence of the accused.

The issue in the civil case for annulment of marriage under Article 36 of the Family Code is
whether petitioner is psychologically incapacitated to comply with the essential marital
obligations. The issue in parricide is whether the accused killed the victim. In this case, since
petitioner was charged with frustrated parricide, the issue is whether he performed all the acts of
execution which would have killed respondent as a consequence but which, nevertheless, did not
produce it by reason of causes independent of petitioners will.[16] At the time of the commission
of the alleged crime, petitioner and respondent were married. The subsequent dissolution of
their marriage, in case the petition in Civil Case No. 04-7392 is granted, will have no effect on the
alleged crime that was committed at the time of the subsistence of the marriage. In short, even if
the marriage between petitioner and respondent is annulled, petitioner could still be held
criminally liable since at the time of the commission of the alleged crime, he was still married to
respondent.

We cannot accept petitioners reliance on Tenebro v. Court of Appeals[17] that the judicial
declaration of the nullity of a marriage on the ground of psychological incapacity retroacts to the
date of the celebration of the marriage insofar as the vinculum between the spouses is
concerned x x x. First, the issue in Tenebro is the effect of the judicial declaration of nullity of a
second or subsequent marriage on the ground of psychological incapacity on a criminal liability
for bigamy. There was no issue of prejudicial question in that case. Second, the Court ruled in
Tenebro that [t]here is x x x a recognition written into the law itself that such a marriage,
although void ab initio, may still produce legal consequences.[18] In fact, the Court declared in
that case that a declaration of the nullity of the second marriage on the ground of psychological
incapacity is of absolutely no moment insofar as the States penal laws are concerned.[19]

In view of the foregoing, the Court upholds the decision of the Court of Appeals. The trial in
Criminal Case No. Q-04-130415 may proceed as the resolution of the issue in Civil Case No. 04-
7392 is not determinative of the guilt or innocence of petitioner in the criminal case.

WHEREFORE, we DENY the petition. We AFFIRM the 20 March 2006 Decision of the Court of
Appeals in CA-G.R. SP No. 91867.

SO ORDERED.

G.R. No. 161075 July 15, 2013

RAFAEL JOSE-CONSING, JR., Petitioner,


vs.
PEOPLE OF THE PHILIPPINES, Respondent.

DECISION

BERSAMIN, J.:

An independent civil action based on fraud initiated by the defrauded party does not raise a
prejudicial question to stop the proceedings in a pending criminal prosecution of the defendant
for estafa through falsification. This is because the result of the independent civil action is
irrelevant to the issue of guilt or innocence of the accused.

The Case

On appeal is the amended decision promulgated on August 18, 2003,1 whereby the Court of
Appeals (CA) granted the writ of certiorari upon petition by the State in C.A.-G.R. No. 71252
entitled People v. Han. Winlove M Dumayas, Presiding Judge, Branch 59, Regional Trial Court,
Makati City and Rafael Consing, Jr., and set aside the assailed order issued on November 26,
2001 by the Regional Trial Court (RTC), Branch 59, in Makati City deferring the arraignment of
petitioner in Criminal Case No. 00-120 entitled People v. Rafael Consing, Jr. upon his motion on
the ground of the existence of a prejudicial question in the civil cases pending between him and
the complainant in the trial courts in Pasig City and Makati City.

Antecedents

Petitioner negotiated with and obtained for himself and his mother, Cecilia de la Cruz (de la Cruz)
various loans totaling ₱18,000,000.00 from Unicapital Inc. (Unicapital). The loans were secured by
a real estate mortgage constituted on a parcel of land (property) covered by Transfer Certificate
of Title (TCT) No. T-687599 of the Registry of Deeds for the Province of Cavite registered under
the name of de la Cruz.2 In accordance with its option to purchase the mortgaged property,
Unicapital agreed to purchase one-half of the property for a total consideration of
₱21,221,500.00. Payment was effected by off-setting the amounts due to

Unicapital under the promissory notes of de la Cruz and Consing in the amount of
₱18,000,000.00 and paying an additional amount of ₱3,145,946.50. The other half of the property
was purchased by Plus Builders, Inc. (Plus Builders), a joint venture partner of Unicapital.3

Before Unicapital and Plus Builders could develop the property, they learned that the title to the
property was really TCT No. 114708 in the names of Po Willie Yu and Juanito Tan Teng, the
parties from whom the property had been allegedly acquired by de la Cruz. TCT No. 687599 held
by De la Cruz appeared to be spurious.4

On its part, Unicapital demanded the return of the total amount of ₱41,377,851.48 as of April 19,
1999 that had been paid to and received by de la Cruz and Consing, but the latter ignored the
demands.5

On July 22, 1999, Consing filed Civil Case No. 1759 in the Pasig City Regional Trial Court (RTC)
(Pasig civil case) for injunctive relief, thereby seeking to enjoin Unicapital from proceeding
against him for the collection of the ₱41,377,851.48 on the ground that he had acted as a mere
agent of his mother.

On the same date, Unicapital initiated a criminal complaint for estafa through falsification of
public document against Consing and de la Cruz in the Makati City Prosecutor’s Office.6

On August 6, 1999, Unicapital sued Consing in the RTC in Makati City (Civil Case No. 99-1418)
for the recovery of a sum of money and damages, with an application for a writ of preliminary
attachment (Makati civil case).7

On January 27, 2000, the Office of the City Prosecutor of Makati City filed against Consing and
De la Cruz an information for estafa through falsification of public document in the RTC in Makati
City (Criminal Case No. 00-120), which was assigned to Branch 60 (Makati criminal case).8

On February 15, 2001, Consing moved to defer his arraignment in the Makati criminal case on
the ground of existence of a prejudicial question due to the pendency of the Pasig and Makati
civil cases. On September 25, 2001, Consing reiterated his motion for deferment of his
arraignment, citing the additional ground of pendency of CA-G.R. SP No. 63712 in the CA. On
November 19, 2001, the Prosecution opposed the motion.9

On November 26, 2001, the RTC issued an order suspending the proceedings in the Makati
criminal case on the ground of the existence of a prejudicial question, and on March 18, 2001,
the RTC denied the Prosecution’s motion for reconsideration.10

The State thus assailed in the CA the last two orders of the RTC in the Makati criminal case via
petition for certiorari (C.A.-G.R. SP No. 71252).

On May 20, 2003, the CA promulgated its decision in C.A.-G.R. SP No. 71252,11 dismissing the
petition for certiorari and upholding the RTC’s questioned orders, explaining:
Is the resolution of the Pasig civil case prejudicial to the Cavite and Makati criminal cases?

We hold that it is. The resolution of the issue in the Pasig case, i.e. whether or not private
respondent may be held liable in the questioned transaction, will determine the guilt or
innocence of private respondent Consing in both the Cavite and Makati criminal cases.

The analysis and comparison of the Pasig civil case, Makati criminal case, Makati civil case and
Cavite criminal case show that: (1) the parties are identical; (2) the transactions in controversy are
identical; (3) the Transfer Certificate of Titles (TCT) involved are identical; (4) the questioned
Deeds of Sale/Mortgage are identical; (5) the dates in question are identical; and (6) the issue of
private respondent’s culpability for the questioned transactions is identical in all the proceedings.

As discussed earlier, not only was the issue raised in the Pasig civil case identical to or intimately
related to the criminal cases in Cavite and Makati. The similarities also extend to the parties in
the cases and the TCT and Deed of Sale/ Mortgage involved in the questioned transactions.

The respondent Judge, in ordering the suspension of the arraignment of private respondent in
the Makati case, in view of CA-G.R. SP No. 63712, where Unicapital was not a party thereto, did
so pursuant to its mandatory power to take judicial notice of an official act of another judicial
authority. It was also a better legal tack to prevent multiplicity of action, to which our legal
system abhors.

Applying the Tuanda ruling, the pendency of CA-G.R. SP No. 63712 may be validly invoked to
suspend private respondent’s arraignment in the Makati City criminal case, notwithstanding the
fact that CA-G.R. SP No. 63712 was an offshoot, merely, in the Cavite criminal case.12

In the meanwhile, on October 13, 1999, Plus Builders commenced its own suit for damages
against Consing (Civil Case No. 99-95381) in the RTC in Manila (Manila civil case).13

On January 21, 2000, an information for estafa through falsification of public document was filed
against Consing and De la Cruz in the RTC in Imus, Cavite, docketed as Criminal Case No. 7668-
00 and assigned to Branch 21 (Cavite criminal case). Consing filed a motion to defer the
arraignment on the ground of the existence of a prejudicial question, i.e., the pendency of the
Pasig and Manila civil cases. On January 27, 2000, however, the RTC handling the Cavite criminal
case denied Consing’s motion. Later on, it also denied his motion for reconsideration. Thereafter,
Consing commenced in the CA a special civil action for certiorari with prayer for the issuance of a
temporary restraining order (TRO) and/or writ of preliminary injunction (C.A.-G.R. SP No. 63712),
seeking to enjoin his arraignment and trial in the Cavite criminal case. The CA granted the TRO
on March 19, 2001, and later promulgated its decision on May 31, 2001, granting Consing’
petition for certiorari and setting aside the January 27, 2000 order of the RTC, and permanently
enjoining the RTC from proceeding with the arraignment and trial until the Pasig and Manila civil
cases had been finally decided.

Not satisfied, the State assailed the decision of the CA in this Court (G.R. No. 148193), praying
for the reversal of the May 31, 2001 decision of the CA. On January 16, 2003, the Court granted
the petition for review in G.R. No. 148193, and reversed and set aside the May 31, 2001 decision
of the CA,14 viz:

In the case at bar, we find no prejudicial question that would justify the suspension of the
proceedings in the criminal case (the Cavite criminal case). The issue in Civil Case No. SCA 1759
(the Pasig civil case) for Injunctive Relief is whether or not respondent (Consing) merely acted as
an agent of his mother, Cecilia de la Cruz; while in Civil Case No. 99-95381 (the Manila civil case),
for Damages and Attachment, the question is whether respondent and his mother are liable to
pay damages and to return the amount paid by PBI for the purchase of the disputed lot. Even if
respondent is declared merely an agent of his mother in the transaction involving the sale of the
questioned lot, he cannot be adjudged free from criminal liability. An agent or any person may
be held liable for conspiring to falsify public documents. Hence, the determination of the issue
involved in Civil Case No. SCA 1759 for Injunctive Relief is irrelevant to the guilt or innocence of
the respondent in the criminal case for estafa through falsification of public document.

Likewise, the resolution of PBI’s right to be paid damages and the purchase price of the lot in
question will not be determinative of the culpability of the respondent in the criminal case for
even if PBI is held entitled to the return of the purchase price plus damages, it does not ipso
facto follow that respondent should be held guilty of estafa through falsification of public
document. Stated differently, a ruling of the court in the civil case that PBI should not be paid the
purchase price plus damages will not necessarily absolve respondent of liability in the criminal
case where his guilt may still be established under penal laws as determined by other evidence.

Moreover, neither is there a prejudicial question if the civil and the criminal action can, according
to law, proceed independently of each other. Under Rule 111, Section 3 of the Revised Rules on
Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, the
independent civil action may be brought by the offended party. It shall proceed independently of
the criminal action and shall require only a preponderance of evidence. In no case, however, may
the offended party recover damages twice for the same act or omission charged in the criminal
action.

Thus, in Rojas v. People, the petitioner was accused in a criminal case for violation of Article 319
of the Revised Penal Code, for executing a new chattel mortgage on personal property in favor
of another party without consent of the previous mortgagee. Thereafter, the offended party filed
a civil case for termination of management contract, one of the causes of action of which
consisted of petitioner having executed a chattel mortgage while the previous chattel mortgage
was still valid and subsisting. Petitioner moved that the arraignment and trial of the criminal case
be held in abeyance on the ground that the civil case was a prejudicial question, the resolution of
which was necessary before the criminal proceedings could proceed. The trial court denied the
suspension of the criminal case on the ground that no prejudicial question exist. We affirmed the
order of the trial court and ruled that:

… the resolution of the liability of the defendant in the civil case on the eleventh cause of action
based on the fraudulent misrepresentation that the chattel mortgage the defendant executed in
favor of the said CMS Estate, Inc. on February 20, 1957, that his D-6 "Caterpillar" Tractor with
Serial No. 9-U-6565 was "free from all liens and encumbrances" will not determine the criminal
liability of the accused in the said Criminal Case No. 56042 for violation of paragraph 2 of Article
319 of the Revised Penal Code. . . . (i) That, even granting for the sake of argument, a prejudicial
question is involved in this case, the fact remains that both the crime charged in the information
in the criminal case and the eleventh cause of action in the civil case are based upon fraud, hence
both the civil and criminal cases could proceed independently of the other pursuant to Article 33
of the new Civil Code which provides: "In cases of defamation, fraud and physical injuries, a civil
action for damages, entirely separate and distinct from the criminal action shall proceed
independently of the criminal prosecution, and shall require only a preponderance of evidence."
(j) That, therefore, the act of respondent judge in issuing the orders referred to in the instant
petition was not made with "grave abuse of discretion."

In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account of the
alleged fraud committed by respondent and his mother in selling the disputed lot to PBI is an
independent civil action under Article 33 of the Civil Code. As such, it will not operate as a
prejudicial question that will justify the suspension of the criminal case at bar.15

Turning back to the Makati criminal case, the State moved for the reconsideration of the adverse
decision of the CA, citing the ruling in G.R. No. 148193, supra, to the effect that the Pasig and
Manila civil cases did not present a prejudicial question that justified the suspension of the
proceedings in the Cavite criminal case, and claiming that under the ruling in G.R. No. 148193,
the Pasig and Makati civil cases did not raise a prejudicial question that would cause the
suspension of the Makati criminal case.

In his opposition to the State’s motion for reconsideration, Consing contended that the ruling in
G.R. No. 148193 was not binding because G.R. No. 148193 involved Plus Builders, which was
different from Unicapital, the complainant in the Makati criminal case. He added that the decision
in G.R. No. 148193 did not yet become final and executory, and could still be reversed at any
time, and thus should not control as a precedent to be relied upon; and that he had acted as an
innocent attorney-in-fact for his mother, and should not be held personally liable under a contract
that had involved property belonging to his mother as his principal.

On August 18, 2003, the CA amended its decision, reversing itself. It relied upon the ruling in
G.R. No. 148193, and held thusly:

CA-G.R. SP No. 63712 is similar with the case at bench. The transactions in controversy, the
documents involved; the issue of the respondent’s culpability for the questioned transactions are
all identical in all the proceedings; and it deals with the same parties with the exception of
private complainant Unicapital.

However, the Supreme Court, upon review of CA-G.R. SP No. 63712, People of the Philippines
vs. Rafael Jose Consing, Jr. (G.R. No. 148193, January 16, 2003) held that "Civil Case No. 99-
95381, for Damages and attachment on account of alleged fraud committed by respondent and
his mother in selling the disputed lot to Plus Builders, Inc. is an independent civil action under
Article 33 of the Civil Code. As such, it will not operate as a prejudicial question that will justify
the suspension of the criminal case at bar." In view of the aforementioned decision of the
Supreme Court, We are thus amending Our May 20, 2003 decision.

WHEREFORE, the petitioner’s motion for reconsideration is GRANTED. The Orders dated
November 26, 2001 and March 18, 2002 issued by the respondent Judge are hereby REVERSED
and SET ASIDE. Respondent Judge is hereby ordered to proceed with the hearing of Criminal
Case No. 00-120 with dispatch.

SO ORDERED.16

Consing filed a motion for reconsideration,17 but the CA denied the motion through the second
assailed resolution of December 11, 2003.18

Hence, this appeal by petition for review on certiorari.

Issue

Petitioner reiterates his contention that the decision in G.R. No. 148193 was not controlling in
relation to C.A.-G.R. No. 71252, which involved Plus Builders, not Unicapital, the complainant in
Criminal Case No. 00-120. He posits that in arriving at its amended decision, the CA did not
consider the pendency of the Makati civil case (Civil Case No. 99-1418), which raised a prejudicial
question, considering that the resolution of such civil action would include the issue of whether
he had falsified a certificate of title or had willfully defrauded Unicapital, the resolution of either
of which would determine his guilt or innocence in Criminal Case No. 00-120.

In its comment,19 the Office of the Solicitor General (OSG) counters that Unicapital brought the
Makati civil case as an independent civil action intended to exact civil liability separately from
Criminal Case No. 00-120 in a manner fully authorized under Section 1(a) and Section 2, Rule 111
of the Rules of Court.20 It argues that the CA correctly took cognizance of the ruling in G.R. No.
148193, holding in its challenged amended decision that the Makati civil case, just like the Manila
civil case, was an independent civil action instituted by virtue of Article 33 of the Civil Code; that
the Makati civil case did not raise a prejudicial question that justified the suspension of Criminal
Case No. 00-120; and that as finally settled in G.R. No. 148193, the Pasig civil case did not also
raise any prejudicial question, because the sole issue thereat was whether Consing, as the mere
agent of his mother, had any obligation or liability toward Unicapital.

In his reply,21 Consing submits that the Pasig civil case that he filed and Unicapital’s Makati civil
case were not intended to delay the resolution of Criminal Case No. 00-120, nor to pre-empt
such resolution; and that such civil cases could be validly considered determinative of whether a
prejudicial question existed to warrant the suspension of Criminal Case No. 00-120.

Did the CA err in reversing itself on the issue of the existence of a prejudicial question that
warranted the suspension of the proceedings in the Makati criminal case?

Ruling

The petition for review on certiorari is absolutely meritless.

Consing has hereby deliberately chosen to ignore the firm holding in the ruling in G.R. No.
148193 to the effect that the proceedings in Criminal Case No. 00-120 could not be suspended
because the Makati civil case was an independent civil action, while the Pasig civil case raised no
prejudicial question. That was wrong for him to do considering that the ruling fully applied to him
due to the similarity between his case with Plus Builders and his case with Unicapital.

A perusal of Unicapital’s complaint in the Makati civil case reveals that the action was predicated
on fraud. This was apparent from the allegations of Unicapital in its complaint to the effect that
Consing and de la Cruz had acted in a "wanton, fraudulent, oppressive, or malevolent manner in
offering as security and later object of sale, a property which they do not own, and foisting to the
public a spurious title."22 As such, the action was one that could proceed independently of
Criminal Case No. 00-120 pursuant to Article 33 of the Civil Code, which states as follows:

Article 33. In cases of defamation, fraud, and physical injuries a civil action for damages, entirely
separate and distinct from the criminal action, may be brought by the injured party. Such civil
action shall proceed independently of the criminal prosecution, and shall require only a
preponderance of evidence.

It is well settled that a civil action based on defamation, fraud and physical injuries may be
independently instituted pursuant to Article 33 of the Civil Code, and does not operate as a
prejudicial question that will justify the suspension of a criminal case.23 This was precisely the
Court’s thrust in G.R. No. 148193, thus:

Moreover, neither is there a prejudicial question if the civil and the criminal action can, according
to law, proceed independently of each other. Under Rule 111, Section 3 of the Revised Rules on
Criminal Procedure, in the cases provided in Articles 32, 33, 34 and 2176 of the Civil Code, the
independent civil action may be brought by the offended party. It shall proceed independently of
the criminal action and shall require only a preponderance of evidence. In no case, however, may
the offended party recover damages twice for the same act or omission charged in the criminal
action.

xxxx

In the instant case, Civil Case No. 99-95381, for Damages and Attachment on account of the
alleged fraud committed by respondent and his mother in selling the disputed lot to PBI is an
independent civil action under Article 33 of the Civil Code. As such, it will not operate as a
prejudicial question that will justify the suspension of the criminal case at bar.24

Contrary to Consing’s stance, it was not improper for the CA to apply the ruling in G.R. No.
148193 to his case with Unicapital, for, although the Manila and Makati civil cases involved
different complainants (i.e., Plus Builders and Unicapital), the civil actions Plus Builders and
Unicapital had separately instituted against him were undeniably of similar mold, i.e., they were
both based on fraud, and were thus covered by Article 33 of the Civil Code. Clearly, the Makati
criminal case could not be suspended pending the resolution of the Makati civil case that
Unicapital had filed.

As far as the Pasig civil case is concerned, the issue of Consing’s being a mere agent of his
mother who should not be criminally liable for having so acted due to the property involved
having belonged to his mother as principal has also been settled in G.R. No. 148193, to wit:

In the case at bar, we find no prejudicial question that would justify the suspension of the
proceedings in the criminal case (the Cavite criminal case). The issue in Civil Case No. SCA 1759
(the Pasig civil case) for Injunctive Relief is whether or not respondent (Consing) merely acted as
an agent of his mother, Cecilia de la Cruz; while in Civil Case No. 99-95381 (the Manila civil case),
for Damages and Attachment, the question is whether respondent and his mother are liable to
pay damages and to return the amount paid by PBI for the purchase of the disputed lot. Even if
respondent is declared merely an agent of his mother in the transaction involving the sale of the
questioned lot, he cannot be adjudged free from criminal liability. An agent or any person may
be held liable for conspiring to falsify public documents. Hence, the determination of the issue
involved in Civil Case No. SCA 1759 for Injunctive Relief is irrelevant to the guilt or innocence of
the respondent in the criminal case for estafa through falsification of public document.25 (Words
in parentheses supplied; bold underscoring supplied for emphasis)

WHEREFORE, the Court AFFIRMS the amended decision promulgated on August 18, 2003; and
ORDERS petitioner to pay the costs of suit.

SO ORDERED.

LUCAS P. BERSAMIN
Associate Justice

G.R. No. 26795 July 31, 1970

CARMEN QUIMIGUING, Suing through her parents, ANTONIO QUIMIGUING and JACOBA
CABILIN, plaintiffs-appellants,
vs.
FELIX ICAO, defendant-appellee.

Torcuato L. Galon for plaintiffs-appellants.

Godardo Jacinto for defendant-appellee.

REYES, J.B.L., J.:

Appeal on points of law from an order of the Court of First Instance of Zamboanga del Norte
(Judge Onofre Sison Abalos, presiding), in its Civil Case No. 1590, dismissing a complaint for
support and damages, and another order denying amendment of the same pleading.

The events in the court of origin can be summarized as follows:

Appellant, Carmen Quimiguing, assisted by her parents, sued Felix Icao in the court below. In her
complaint it was averred that the parties were neighbors in Dapitan City, and had close and
confidential relations; that defendant Icao, although married, succeeded in having carnal
intercourse with plaintiff several times by force and intimidation, and without her consent; that as
a result she became pregnant, despite efforts and drugs supplied by defendant, and plaintiff had
to stop studying. Hence, she claimed support at P120.00 per month, damages and attorney's
fees.
Duly summoned, defendant Icao moved to dismiss for lack of cause of action since the complaint
did not allege that the child had been born; and after hearing arguments, the trial judge
sustained defendant's motion and dismissed the complaint.

Thereafter, plaintiff moved to amend the complaint to allege that as a result of the intercourse,
plaintiff had later given birth to a baby girl; but the court, sustaining defendant's objection, ruled
that no amendment was allowable, since the original complaint averred no cause of action.
Wherefore, the plaintiff appealed directly to this Court.

We find the appealed orders of the court below to be untenable. A conceived child, although as
yet unborn, is given by law a provisional personality of its own for all purposes favorable to it, as
explicitly provided in Article 40 of the Civil Code of the Philippines. The unborn child, therefore,
has a right to support from its progenitors, particularly of the defendant-appellee (whose
paternity is deemed admitted for the purpose of the motion to dismiss), even if the said child is
only "en ventre de sa mere;" just as a conceived child, even if as yet unborn, may receive
donations as prescribed by Article 742 of the same Code, and its being ignored by the parent in
his testament may result in preterition of a forced heir that annuls the institution of the
testamentary heir, even if such child should be born after the death of the testator Article 854,
Civil Code).

ART. 742. Donations made to conceived and unborn children may be accepted by those persons
who would legally represent them if they were already born.

ART. 854. The preterition or omission of one, some, or all of the compulsory heirs in the direct
line, whether living at the time of the execution of the will or born after the death of the testator,
shall annul the institution of heir; but the devises and legacies shall be valid insofar as they are
not inofficious.

If the omitted compulsory heirs should die before the testator, the institution shall be effectual,
without prejudice to the right of 'representation.

It is thus clear that the lower court's theory that Article 291 of the Civil Code declaring that
support is an obligation of parents and illegitimate children "does not contemplate support to
children as yet unborn," violates Article 40 aforesaid, besides imposing a condition that nowhere
appears in the text of Article 291. It is true that Article 40 prescribing that "the conceived child
shall be considered born for all purposes that are favorable to it" adds further "provided it be
born later with the conditions specified in the following article" (i.e., that the foetus be alive at
the time it is completely delivered from the mother's womb). This proviso, however, is not a
condition precedent to the right of the conceived child; for if it were, the first part of Article 40
would become entirely useless and ineffective. Manresa, in his Commentaries (5th Ed.) to the
corresponding Article 29 of the Spanish Civil Code, clearly points this out:

Los derechos atribuidos al nasciturus no son simples expectativas, ni aun en el sentido tecnico
que la moderna doctrina da a esta figura juridica sino que constituyen un caso de los
propiamente Ilamados 'derechos en estado de pendenci'; el nacimiento del sujeto en las
condiciones previstas por el art. 30, no determina el nacimiento de aquellos derechos (que ya
existian de antemano), sino que se trata de un hecho que tiene efectos declarativos. (1 Manresa,
Op. cit., page 271)

A second reason for reversing the orders appealed from is that for a married man to force a
woman not his wife to yield to his lust (as averred in the original complaint in this case)
constitutes a clear violation of the rights of his victim that entitles her to claim compensation for
the damage caused. Says Article 21 of the Civil Code of the Philippines:

ART. 21. Any person who wilfully causes loss or injury to another in a manner that is contrary to
morals, good customs or public policy shall compensate the latter for the damage.

The rule of Article 21 is supported by Article 2219 of the same Code:

ART 2219. Moral damages may be recovered in the following and analogous cases:

(3) Seduction, abduction, rape or other lascivious acts:

xxx xxx xxx

(10) Acts and actions referred to in Articles 21, 26, 27, 28 ....

Thus, independently of the right to Support of the child she was carrying, plaintiff herself had a
cause of action for damages under the terms of the complaint; and the order dismissing it for
failure to state a cause of action was doubly in error.

WHEREFORE, the orders under appeal are reversed and set aside. Let the case be remanded to
the court of origin for further proceedings conformable to this decision. Costs against appellee
Felix Icao. So ordered.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee, Barredo and
Villamor, JJ., concur.

CONTINENTAL STEEL MANUFACTURING CORPORATION,

Petitioner,

- versus -

HON. ACCREDITED VOLUNTARY ARBITRATOR ALLAN S. MONTAO and NAGKAKAISANG


MANGGAGAWA NG CENTRO STEEL CORPORATION-SOLIDARITY OF UNIONS IN THE
PHILIPPINES FOR EMPOWERMENT AND REFORMS (NMCSC-SUPER),

Respondents.
G.R. No. 182836

Present:

CARPIO, J.,

Chairperson,

CHICO-NAZARIO,

VELASCO, JR.,

NACHURA, and

PERALTA, JJ.

Promulgated:

October 13, 2009

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION

CHICO-NAZARIO, J.:

Before Us is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the
Decision[1] dated 27 February 2008 and the Resolution[2] dated 9 May 2008 of the Court of
Appeals in CA-G.R. SP No. 101697, affirming the Resolution[3] dated 20 November 2007 of
respondent Accredited Voluntary Arbitrator Atty. Allan S. Montao (Montao) granting
bereavement leave and other death benefits to Rolando P. Hortillano (Hortillano), grounded on
the death of his unborn child.

The antecedent facts of the case are as follows:

Hortillano, an employee of petitioner Continental Steel Manufacturing Corporation (Continental


Steel) and a member of respondent Nagkakaisang Manggagawa ng Centro Steel Corporation-
Solidarity of Trade Unions in the Philippines for Empowerment and Reforms (Union) filed on 9
January 2006, a claim for Paternity Leave, Bereavement Leave and Death and Accident Insurance
for dependent, pursuant to the Collective Bargaining Agreement (CBA) concluded between
Continental and the Union, which reads:

ARTICLE X: LEAVE OF ABSENCE

xxxx

Section 2. BEREAVEMENT LEAVEThe Company agrees to grant a bereavement leave with pay to
any employee in case of death of the employees legitimate dependent (parents, spouse,
children, brothers and sisters) based on the following:
2.1 Within Metro Manila up to Marilao, Bulacan - 7 days

2.2 Provincial/Outside Metro Manila - 11 days

xxxx

ARTICLE XVIII: OTHER BENEFITS

xxxx

Section 4. DEATH AND ACCIDENT INSURANCEThe Company shall grant death and accidental
insurance to the employee or his family in the following manner:

xxxx

4.3 DEPENDENTSEleven Thousand Five Hundred Fifty Pesos (Php11,550.00) in case of death of
the employees legitimate dependents (parents, spouse, and children). In case the employee is
single, this benefit covers the legitimate parents, brothers and sisters only with proper legal
document to be presented (e.g. death certificate).[4]

The claim was based on the death of Hortillanos unborn child. Hortillanos wife, Marife V.
Hortillano, had a premature delivery on 5 January 2006 while she was in the 38th week of
pregnancy.[5] According to the Certificate of Fetal Death dated 7 January 2006, the female fetus
died during labor due to fetal Anoxia secondary to uteroplacental insufficiency.[6]
Continental Steel immediately granted Hortillanos claim for paternity leave but denied his claims
for bereavement leave and other death benefits, consisting of the death and accident
insurance.[7]

Seeking the reversal of the denial by Continental Steel of Hortillanos claims for bereavement and
other death benefits, the Union resorted to the grievance machinery provided in the CBA.
Despite the series of conferences held, the parties still failed to settle their dispute,[8] prompting
the Union to file a Notice to Arbitrate before the National Conciliation and Mediation Board
(NCMB) of the Department of Labor and Employment (DOLE), National Capital Region (NCR).[9]
In a Submission Agreement dated 9 October 2006, the Union and Continental Steel submitted
for voluntary arbitration the sole issue of whether Hortillano was entitled to bereavement leave
and other death benefits pursuant to Article X, Section 2

and Article XVIII, Section 4.3 of the CBA.[10] The parties mutually chose Atty. Montao, an
Accredited Voluntary Arbitrator, to resolve said issue.[11]

When the preliminary conferences again proved futile in amicably settling the dispute, the parties
proceeded to submit their respective Position Papers, [12] Replies,[13] and Rejoinders[14] to
Atty. Montao.

The Union argued that Hortillano was entitled to bereavement leave and other death benefits
pursuant to the CBA. The Union maintained that Article X, Section 2 and Article XVIII, Section 4.3
of the CBA did not specifically state that the dependent should have first been born alive or must
have acquired juridical personality so that his/her subsequent death could be covered by the
CBA death benefits. The Union cited cases wherein employees of MKK Steel Corporation (MKK
Steel) and Mayer Steel Pipe Corporation (Mayer Steel), sister companies of Continental Steel, in
similar situations as Hortillano were able to receive death benefits under similar provisions of
their CBAs.

The Union mentioned in particular the case of Steve L. Dugan (Dugan), an employee of Mayer
Steel, whose wife also prematurely delivered a fetus, which had already died prior to the
delivery. Dugan was able to receive paternity leave, bereavement leave, and voluntary
contribution under the CBA between his union and Mayer Steel.[15] Dugans child was only 24
weeks in the womb and died before labor, as opposed to Hortillanos child who was already 37-
38 weeks in the womb and only died during labor.
The Union called attention to the fact that MKK Steel and Mayer Steel are located in the same
compound as Continental Steel; and the representatives of MKK Steel and Mayer Steel who
signed the CBA with their respective employees unions were the same as the representatives of
Continental Steel who signed the existing CBA with the Union.

Finally, the Union invoked Article 1702 of the Civil Code, which provides that all doubts in labor
legislations and labor contracts shall be construed in favor of the safety of and decent living for
the laborer.

On the other hand, Continental Steel posited that the express provision of the CBA did not
contemplate the death of an unborn child, a fetus, without legal personality. It claimed that there
are two elements for the entitlement to the benefits, namely: (1) death and (2) status as
legitimate dependent, none of which existed in Hortillanos case. Continental Steel, relying on
Articles 40, 41 and 42[16] of the Civil Code, contended that only one with civil personality could
die. Hence, the unborn child never died because it never acquired juridical personality.
Proceeding from the same line of thought, Continental Steel reasoned that a fetus that was dead
from the moment of delivery was not a person at all. Hence, the term dependent could not be
applied to a fetus that never acquired juridical personality. A fetus that was delivered dead could
not be considered a dependent, since it never needed any support, nor did it ever acquire the
right to be supported.

Continental Steel maintained that the wording of the CBA was clear and unambiguous. Since
neither of the parties qualified the terms used in the CBA, the legally accepted definitions
thereof were deemed automatically accepted by both parties. The failure of the Union to have
unborn child included in the definition of dependent, as used in the CBA the death of whom
would have qualified the parent-employee for bereavement leave and other death benefits
bound the Union to the legally accepted definition of the latter term.

Continental Steel, lastly, averred that similar cases involving the employees of its sister
companies, MKK Steel and Mayer Steel, referred to by the Union, were irrelevant and
incompetent evidence, given the separate and distinct personalities of the companies. Neither
could the Union sustain its claim that the grant of bereavement leave and other death benefits to
the parent-employee for the loss of an unborn child constituted company practice.
On 20 November 2007, Atty. Montao, the appointed Accredited Voluntary Arbitrator, issued a
Resolution[17] ruling that Hortillano was entitled to bereavement leave with pay and death
benefits.

Atty. Montao identified the elements for entitlement to said benefits, thus:

This Office declares that for the entitlement of the benefit of bereavement leave with pay by the
covered employees as provided under Article X, Section 2 of the parties CBA, three (3)
indispensable elements must be present: (1) there is death; (2) such death must be of employees
dependent; and (3) such dependent must be legitimate.

On the otherhand, for the entitlement to benefit for death and accident insurance as provided
under Article XVIII, Section 4, paragraph (4.3) of the parties CBA, four (4) indispensable elements
must be present: (a) there is death; (b) such death must be of employees dependent; (c) such
dependent must be legitimate; and (d) proper legal document to be presented.[18]

Atty. Montao found that there was no dispute that the death of an employees legitimate
dependent occurred. The fetus had the right to be supported by the parents from the very
moment he/she was conceived. The fetus had to rely on another for support; he/she could not
have existed or sustained himself/herself without the power or aid of someone else, specifically,
his/her mother. Therefore, the fetus was already a dependent, although he/she died during the
labor or delivery. There was also no question that Hortillano and his wife were lawfully married,
making their dependent, unborn child, legitimate.

In the end, Atty. Montao decreed:

WHEREFORE, premises considered, a resolution is hereby rendered ORDERING [herein


petitioner Continental Steel] to pay Rolando P. Hortillano the amount of Four Thousand Nine
Hundred Thirty-Nine Pesos (P4,939.00), representing his bereavement leave pay and the amount
of Eleven Thousand Five Hundred Fifty Pesos (P11,550.00) representing death benefits, or a total
amount of P16,489.00
The complaint against Manuel Sy, however, is ORDERED DISMISSED for lack of merit.

All other claims are DISMISSED for lack of merit.

Further, parties are hereby ORDERED to faithfully abide with the herein dispositions.

Aggrieved, Continental Steel filed with the Court of Appeals a Petition for Review on
Certiorari,[19] under Section 1, Rule 43 of the Rules of Court, docketed as CA-G.R. SP No.
101697.

Continental Steel claimed that Atty. Montao erred in granting Hortillanos claims for bereavement
leave with pay and other death benefits because no death of an employees dependent had
occurred. The death of a fetus, at whatever stage of pregnancy, was excluded from the coverage
of the CBA since what was contemplated by the CBA was the death of a legal person, and not
that of a fetus, which did not acquire any juridical personality. Continental Steel pointed out that
its contention was bolstered by the fact that the term death was qualified by the phrase
legitimate dependent. It asserted that the status of a child could only be determined upon said
childs birth, otherwise, no such appellation can be had. Hence, the conditions sine qua non for
Hortillanos entitlement to bereavement leave and other death benefits under the CBA were
lacking.

The Court of Appeals, in its Decision dated 27 February 2008, affirmed Atty. Montaos Resolution
dated 20 November 2007. The appellate court interpreted death to mean as follows:

[Herein petitioner Continental Steels] exposition on the legal sense in which the term death is
used in the CBA fails to impress the Court, and the same is irrelevant for ascertaining the
purpose, which the grant of bereavement leave and death benefits thereunder, is intended to
serve. While there is no arguing with [Continental Steel] that the acquisition of civil personality of
a child or fetus is conditioned on being born alive upon delivery, it does not follow that such
event of premature delivery of a fetus could never be contemplated as a death as to be covered
by the CBA provision, undoubtedly an event causing loss and grief to the affected employee,
with whom the dead fetus stands in a legitimate relation. [Continental Steel] has proposed a
narrow and technical significance to the term death of a legitimate dependent as condition for
granting bereavement leave and death benefits under the CBA. Following [Continental Steels]
theory, there can be no experience of death to speak of. The Court, however, does not share this
view. A dead fetus simply cannot be equated with anything less than loss of human life,
especially for the expectant parents. In this light, bereavement leave and death benefits are
meant to assuage the employee and the latters immediate family, extend to them solace and
support, rather than an act conferring legal status or personality upon the unborn child.
[Continental Steels] insistence that the certificate of fetal death is for statistical purposes only
sadly misses this crucial point.[20]

Accordingly, the fallo of the 27 February 2008 Decision of the Court of Appeals reads:

WHEREFORE, premises considered, the present petition is hereby DENIED for lack of merit. The
assailed Resolution dated November 20, 2007 of Accredited Voluntary Arbitrator Atty. Allan S.
Montao is hereby AFFIRMED and UPHELD.

With costs against [herein petitioner Continental Steel].[21]

In a Resolution[22] dated 9 May 2008, the Court of Appeals denied the Motion for
Reconsideration[23] of Continental Steel.

Hence, this Petition, in which Continental Steel persistently argues that the CBA is clear and
unambiguous, so that the literal and legal meaning of death should be applied. Only one with
juridical personality can die and a dead fetus never acquired a juridical personality.

We are not persuaded.


As Atty. Montao identified, the elements for bereavement leave under Article X, Section 2 of the
CBA are: (1) death; (2) the death must be of a dependent, i.e., parent, spouse, child, brother, or
sister, of an employee; and (3) legitimate relations of the dependent to the employee. The
requisites for death and accident insurance under Article XVIII, Section 4(3) of the CBA are: (1)
death; (2) the death must be of a dependent, who could be a parent, spouse, or child of a
married employee; or a parent, brother, or sister of a single employee; and (4) presentation of
the proper legal document to prove such death, e.g., death certificate.

It is worthy to note that despite the repeated assertion of Continental Steel that the provisions of
the CBA are clear and unambiguous, its fundamental argument for denying Hortillanos claim for
bereavement leave and other death benefits rests on the purportedly proper interpretation of
the terms death and dependent as used in the CBA. If the provisions of the CBA are indeed clear
and unambiguous, then there is no need to resort to the interpretation or construction of the
same. Moreover, Continental Steel itself admitted that neither management nor the Union
sought to define the pertinent terms for bereavement leave and other death benefits during the
negotiation of the CBA.

The reliance of Continental Steel on Articles 40, 41 and 42 of the Civil Code for the legal
definition of death is misplaced. Article 40 provides that a conceived child acquires personality
only when it is born, and Article 41 defines when a child is considered born. Article 42 plainly
states that civil personality is extinguished by death.

First, the issue of civil personality is not relevant herein. Articles 40, 41 and 42 of the Civil Code
on natural persons, must be applied in relation to Article 37 of the same Code, the very first of
the general provisions on civil personality, which reads:

Art. 37. Juridical capacity, which is the fitness to be the subject of legal relations, is inherent in
every natural person and is lost only through death. Capacity to act, which is the power to do
acts with legal effect, is acquired and may be lost.

We need not establish civil personality of the unborn child herein since his/her juridical capacity
and capacity to act as a person are not in issue. It is not a question before us whether the unborn
child acquired any rights or incurred any obligations prior to his/her death that were passed on
to or assumed by the childs parents. The rights to bereavement leave and other death benefits in
the instant case pertain directly to the parents of the unborn child upon the latters death.

Second, Sections 40, 41 and 42 of the Civil Code do not provide at all a definition of death.
Moreover, while the Civil Code expressly provides that civil personality may be extinguished by
death, it does not explicitly state that only those who have acquired juridical personality could
die.

And third, death has been defined as the cessation of life.[24] Life is not synonymous with civil
personality. One need not acquire civil personality first before he/she could die. Even a child
inside the womb already has life. No less than the Constitution recognizes the life of the unborn
from conception,[25] that the State must protect equally with the life of the mother. If the unborn
already has life, then the cessation thereof even prior to the child being delivered, qualifies as
death.

Likewise, the unborn child can be considered a dependent under the CBA. As Continental Steel
itself defines, a dependent is one who relies on another for support; one not able to exist or
sustain oneself without the power or aid of someone else. Under said general definition,[26] even
an unborn child is a dependent of its parents. Hortillanos child could not have reached 38-39
weeks of its gestational life without depending upon its mother, Hortillanos wife, for sustenance.
Additionally, it is explicit in the CBA provisions in question that the dependent may be the
parent, spouse, or child of a married employee; or the parent, brother, or sister of a single
employee. The CBA did not provide a qualification for the child dependent, such that the child
must have been born or must have acquired civil personality, as Continental Steel avers. Without
such qualification, then child shall be understood in its more general sense, which includes the
unborn fetus in the mothers womb.

The term legitimate merely addresses the dependent childs status in relation to his/her parents.
In Angeles v. Maglaya,[27] we have expounded on who is a legitimate child, viz:

A legitimate child is a product of, and, therefore, implies a valid and lawful marriage. Remove
the element of lawful union and there is strictly no legitimate filiation between parents and child.
Article 164 of the Family Code cannot be more emphatic on the matter: Children conceived or
born during the marriage of the parents are legitimate. (Emphasis ours.)
Conversely, in Briones v. Miguel,[28] we identified an illegitimate child to be as follows:

The fine distinctions among the various types of illegitimate children have been eliminated in the
Family Code. Now, there are only two classes of children -- legitimate (and those who, like the
legally adopted, have the rights of legitimate children) and illegitimate. All children conceived
and born outside a valid marriage are illegitimate, unless the law itself gives them legitimate
status. (Emphasis ours.)

It is apparent that according to the Family Code and the afore-cited jurisprudence, the legitimacy
or illegitimacy of a child attaches upon his/her conception. In the present case, it was not
disputed that Hortillano and his wife were validly married and that their child was conceived
during said marriage, hence, making said child legitimate upon her conception.

Also incontestable is the fact that Hortillano was able to comply with the fourth element entitling
him to death and accident insurance under the CBA, i.e., presentation of the death certificate of
his unborn child.

Given the existence of all the requisites for bereavement leave and other death benefits under
the CBA, Hortillanos claims for the same should have been granted by Continental Steel.

We emphasize that bereavement leave and other death benefits are granted to an employee to
give aid to, and if possible, lessen the grief of, the said employee and his family who suffered the
loss of a loved one. It cannot be said that the parents grief and sense of loss arising from the
death of their unborn child, who, in this case, had a gestational life of 38-39 weeks but died
during delivery, is any less than that of parents whose child was born alive but died subsequently.

Being for the benefit of the employee, CBA provisions on bereavement leave and other death
benefits should be interpreted liberally to give life to the intentions thereof. Time and again, the
Labor Code is specific in enunciating that in case of doubt in the interpretation of any law or
provision affecting labor, such should be interpreted in favor of labor.[29] In the same way, the
CBA and CBA provisions should be interpreted in favor of labor. In Marcopper Mining v. National
Labor Relations Commission,[30] we pronounced:

Finally, petitioner misinterprets the declaration of the Labor Arbiter in the assailed decision that
"when the pendulum of judgment swings to and fro and the forces are equal on both sides, the
same must be stilled in favor of labor." While petitioner acknowledges that all doubts in the
interpretation of the Labor Code shall be resolved in favor of labor, it insists that what is
involved-here is the amended CBA which is essentially a contract between private persons. What
petitioner has lost sight of is the avowed policy of the State, enshrined in our Constitution, to
accord utmost protection and justice to labor, a policy, we are, likewise, sworn to uphold.

In Philippine Telegraph & Telephone Corporation v. NLRC [183 SCRA 451 (1990)], we
categorically stated that:

When conflicting interests of labor and capital are to be weighed on the scales of social justice,
the heavier influence of the latter should be counter-balanced by sympathy and compassion the
law must accord the underprivileged worker.

Likewise, in Terminal Facilities and Services Corporation v. NLRC [199 SCRA 265 (1991)], we
declared:

Any doubt concerning the rights of labor should be resolved in its favor pursuant to the social
justice policy.

IN VIEW WHEREOF, the Petition is DENIED. The Decision dated 27 February 2008 and
Resolution dated 9 May 2008 of the Court of Appeals in CA-G.R. SP No. 101697, affirming the
Resolution dated 20 November 2007 of Accredited Voluntary Arbitrator Atty. Allan S. Montao,
which granted to Rolando P. Hortillano bereavement leave pay and other death benefits in the
amounts of Four Thousand Nine Hundred Thirty-Nine Pesos (P4,939.00) and Eleven Thousand
Five Hundred Fifty Pesos (P11,550.00), respectively, grounded on the death of his unborn child,
are AFFIRMED. Costs against Continental Steel Manufacturing Corporation.
SO ORDERED.

[G.R. No. 144476. April 8, 2003]

ONG YONG, JUANITA TAN ONG, WILSON T. ONG, ANNA L. ONG, WILLIAM T. ONG, WILLIE
T. ONG, and JULIE ONG ALONZO, petitioners, vs. DAVID S. TIU, CELY Y. TIU, MOLY YU GAW,
BELEN SEE YU, D. TERENCE Y. TIU, JOHN YU, LOURDES C. TIU, INTRALAND RESOURCES
DEVELOPMENT CORP., MASAGANA TELAMART, INC., REGISTER OF DEEDS OF PASAY CITY,
and the SECURITIES AND EXCHANGE COMMISSION, respondents.

[G.R. No. 144629. April 8, 2003]

DAVID S. TIU, CELY Y. TIU, MOLY YU GAW, BELEN SEE YU, D. TERENCE Y. TIU, JOHN YU,
LOURDES C. TIU, and INTRALAND RESOURCES DEVELOPMENT CORP., petitioners, vs. ONG
YONG, JUANITA TAN ONG, WILSON T. ONG, ANNA L. ONG, WILLIAM T. ONG, WILLIE T.
ONG, and JULIA ONG ALONZO, respondents.

RESOLUTION

CORONA, J.:

Before us are the (1) motion for reconsideration, dated March 15, 2002, of petitioner movants
Ong Yong, Juanita Tan Ong, Wilson Ong, Anna Ong, William Ong, Willie Ong and Julia Ong
Alonzo (the Ongs); (2) motion for partial reconsideration, dated March 15, 2002, of petitioner
movant Willie Ong seeking a reversal of this Courts Decision,[1] dated February 1, 2002, in G.R.
Nos. 144476 and 144629 affirming with modification the decision[2] of the Court of Appeals,
dated October 5, 1999, which in turn upheld, likewise with modification, the decision of the SEC
en banc, dated September 11, 1998; and (3) motion for issuance of writ of execution of
petitioners David S. Tiu, Cely Y. Tiu, Moly Yu Gow, Belen See Yu, D. Terence Y. Tiu, John Yu and
Lourdes C. Tiu (the Tius) of our February 1, 2002 Decision.

A brief recapitulation of the facts shows that:

In 1994, the construction of the Masagana Citimall in Pasay City was threatened with stoppage
and incompletion when its owner, the First Landlink Asia Development Corporation (FLADC),
which was owned by the Tius, encountered dire financial difficulties. It was heavily indebted to
the Philippine National Bank (PNB) for P190 million. To stave off foreclosure of the mortgage on
the two lots where the mall was being built, the Tius invited Ong Yong, Juanita Tan Ong, Wilson
T. Ong, Anna L. Ong, William T. Ong and Julia Ong Alonzo (the Ongs), to invest in FLADC. Under
the Pre-Subscription Agreement they entered into, the Ongs and the Tius agreed to maintain
equal shareholdings in FLADC: the Ongs were to subscribe to 1,000,000 shares at a par value of
P100.00 each while the Tius were to subscribe to an additional 549,800 shares at P100.00 each in
addition to their already existing subscription of 450,200 shares. Furthermore, they agreed that
the Tius were entitled to nominate the Vice-President and the Treasurer plus five directors while
the Ongs were entitled to nominate the President, the Secretary and six directors (including the
chairman) to the board of directors of FLADC. Moreover, the Ongs were given the right to
manage and operate the mall.

Accordingly, the Ongs paid P100 million in cash for their subscription to 1,000,000 shares of
stock while the Tius committed to contribute to FLADC a four-storey building and two parcels of
land respectively valued at P20 million (for 200,000 shares), P30 million (for 300,000 shares) and
P49.8 million (for 49,800 shares) to cover their additional 549,800 stock subscription therein. The
Ongs paid in another P70 million[3] to FLADC and P20 million to the Tius over and above their
P100 million investment, the total sum of which (P190 million) was used to settle the P190 million
mortgage indebtedness of FLADC to PNB.

The business harmony between the Ongs and the Tius in FLADC, however, was shortlived
because the Tius, on February 23, 1996, rescinded the Pre-Subscription Agreement. The Tius
accused the Ongs of (1) refusing to credit to them the FLADC shares covering their real property
contributions; (2) preventing David S. Tiu and Cely Y. Tiu from assuming the positions of and
performing their duties as Vice-President and Treasurer, respectively, and (3) refusing to give
them the office spaces agreed upon.

According to the Tius, the agreement was for David S. Tiu and Cely S. Tiu to assume the
positions and perform the duties of Vice-President and Treasurer, respectively, but the Ongs
prevented them from doing so. Furthermore, the Ongs refused to provide them the space for
their executive offices as Vice-President and Treasurer. Finally, and most serious of all, the Ongs
refused to give them the shares corresponding to their property contributions of a four-story
building, a 1,902.30 square-meter lot and a 151 square-meter lot. Hence, they felt they were
justified in setting aside their Pre-Subscription Agreement with the Ongs who allegedly refused
to comply with their undertakings.

In their defense, the Ongs said that David S. Tiu and Cely Y. Tiu had in fact assumed the positions
of Vice-President and Treasurer of FLADC but that it was they who refused to comply with the
corporate duties assigned to them. It was the contention of the Ongs that they wanted the Tius
to sign the checks of the corporation and undertake their management duties but that the Tius
shied away from helping them manage the corporation. On the issue of office space, the Ongs
pointed out that the Tius did in fact already have existing executive offices in the mall since they
owned it 100% before the Ongs came in. What the Tius really wanted were new offices which
were anyway subsequently provided to them. On the most important issue of their alleged failure
to credit the Tius with the FLADC shares commensurate to the Tius property contributions, the
Ongs asserted that, although the Tius executed a deed of assignment for the 1,902.30 square-
meter lot in favor of FLADC, they (the Tius) refused to pay P 570,690 for capital gains tax and
documentary stamp tax. Without the payment thereof, the SEC would not approve the valuation
of the Tius property contribution (as opposed to cash contribution). This, in turn, would make it
impossible to secure a new Transfer Certificate of Title (TCT) over the property in FLADCs name.
In any event, it was easy for the Tius to simply pay the said transfer taxes and, after the new TCT
was issued in FLADCs name, they could then be given the corresponding shares of stocks. On
the 151 square-meter property, the Tius never executed a deed of assignment in favor of
FLADC. The Tius initially claimed that they could not as yet surrender the TCT because it was still
being reconstituted by the Lichaucos from whom the Tius bought it. The Ongs later on
discovered that FLADC had in reality owned the property all along, even before their Pre-
Subscription Agreement was executed in 1994. This meant that the 151 square-meter property
was at that time already the corporate property of FLADC for which the Tius were not entitled to
the issuance of new shares of stock.

The controversy finally came to a head when this case was commenced[4] by the Tius on
February 27, 1996 at the Securities and Exchange Commission (SEC), seeking confirmation of
their rescission of the Pre-Subscription Agreement. After hearing, the SEC, through then Hearing
Officer Rolando G. Andaya, Jr., issued a decision on May 19, 1997 confirming the rescission
sought by the Tius, as follows:

WHEREFORE, judgment is hereby rendered confirming the rescission of the Pre-Subscription


Agreement, and consequently ordering:

(a) The cancellation of the 1,000,000 shares subscription of the individual defendants in FLADC;

(b) FLADC to pay the amount of P170,000,000.00 to the individual defendants representing the
return of their contribution for 1,000,000 shares of FLADC;

( c) The plaintiffs to submit with (sic) the Securities and Exchange Commission amended articles
of incorporation of FLADC to conform with this decision;

(d) The defendants to surrender to the plaintiffs TCT Nos. 132493, 132494, 134066 (formerly
15587), 135325 and 134204 and any other title or deed in the name of FLADC, failing in which
said titles are declared void;

(e) The Register of Deeds to issue new certificates of titles in favor of the plaintiffs and to cancel
the annotation of the Pre-Subscription Agreement dated 15 August 1994 on TCT No. 134066
(formerly 15587);

(f) The individual defendants, individually and collectively, their agents and representatives, to
desist from exercising or performing any and all acts pertaining to stockholder, director or officer
of FLADC or in any manner intervene in the management and affairs of FLADC;

(g) The individual defendants, jointly and severally, to return to FLADC interest payment in the
amount of P8,866,669.00 and all interest payments as well as any payments on principal received
from the P70,000,000.00 inexistent loan, plus the legal rate of interest thereon from the date of
their receipt of such payment until fully paid;

(h) The plaintiff David Tiu to pay individual defendants the sum of P20,000,000.00 representing
his loan from said defendants plus legal interest from the date of receipt of such amount.

SO ORDERED.[5]

On motion of both parties, the above decision was partially reconsidered but only insofar as the
Ongs P70 million was declared not as a premium on capital stock but an advance (loan) by the
Ongs to FLADC and that the imposition of interest on it was correct.[6]
Both parties appealed[7] to the SEC en banc which rendered a decision on September 11, 1998,
affirming the May 19, 1997 decision of the Hearing Officer. The SEC en banc confirmed the
rescission of the Pre-Subscription Agreement but reverted to classifying the P70 million paid by
the Ongs as premium on capital and not as a loan or advance to FLADC, hence, not entitled to
earn interest.[8]

On appeal, the Court of Appeals (CA) rendered a decision on October 5, 1999, thus:

WHEREFORE, the Order dated September 11, 1998 issued by the Securities and Exchange
Commission En Banc in SEC AC CASE NOS. 598 and 601 confirming the rescission of the Pre-
Subscription Agreement dated August 15, 1994 is hereby AFFIRMED, subject to the following
MODIFICATIONS:

1. The Ong and Tiu Groups are ordered to liquidate First Landlink Asia Development Corporation
in accordance with the following cash and property contributions of the parties therein.

(a) Ong Group P100,000,000.00 cash contribution for one (1) million shares in First Landlink Asia
Development Corporation at a par value of P100.00 per share;

(b) Tiu Group:

1) P45,020,000.00 original cash contribution for 450,200 shares in First Landlink Asia
Development Corporation at a par value of P100.00 per share;

2) A four-storey building described in Transfer Certificate of Title No. 15587 in the name of
Intraland Resources and Development Corporation valued at P20,000,000.00 for 200,000 shares
in First Landlink Asia Development Corporation at a par value of P100.00 per share;

3) A 1,902.30 square-meter parcel of land covered by Transfer Certificate of Title No. 15587 in
the name of Masagana Telamart, Inc. valued at P30,000,000.00 for 300,000 shares in First
Landlink Asia Development Corporation at a par value of P100.00 per share.

2) Whatever remains of the assets of the First Landlink Asia Development Corporation and the
management thereof is (sic) hereby ordered transferred to the Tiu Group.

3) First Landlink Asia Development Corporation is hereby ordered to pay the amount of
P70,000,000.00 that was advanced to it by the Ong Group upon the finality of this decision.
Should the former incur in delay in the payment thereof, it shall pay the legal interest thereon
pursuant to Article 2209 of the New Civil Code.

4) The Tius are hereby ordered to pay the amount of P20,000,000.00 loaned them by the Ongs
upon the finality of this decision. Should the former incur in delay in the payment thereof, it shall
pay the legal interest thereon pursuant to Article 2209 of the New Civil Code.

SO ORDERED.[9]
An interesting sidelight of the CA decision was its description of the rescission made by the Tius
as the height of ingratitude and as pulling a fast one on the Ongs. The CA moreover found the
Tius guilty of withholding FLADC funds from the Ongs and diverting corporate income to their
own MATTERCO account.[10] These were findings later on affirmed in our own February 1, 2002
Decision which is the subject of the instant motion for reconsideration.[11]

But there was also a strange aspect of the CA decision. The CA concluded that both the Ongs
and the Tius were in pari delicto (which would not have legally entitled them to rescission) but,
for practical considerations, that is, their inability to work together, it was best to separate the
two groups by rescinding the Pre-Subscription Agreement, returning the original investment of
the Ongs and awarding practically everything else to the Tius.

Their motions for reconsideration having been denied, both parties filed separate petitions for
review before this Court.

In their petition docketed as G.R. No. 144476, Ong et al. vs. Tiu et al., the Ongs argued that the
Tius may not properly avail of rescission under Article 1191 of the Civil Code considering that the
Pre-Subscription Agreement did not provide for reciprocity of obligations; that the rights over
the subject matter of the rescission (capital assets and properties) had been acquired by a third
party (FLADC); that they did not commit a substantial and fundamental breach of their
agreement since they did not prevent the Tius from assuming the positions of Vice-President and
Treasurer of FLADC, and that the failure to credit the 300,000 shares corresponding to the
1,902.30 square-meter property covered by TCT No. 134066 (formerly 15587) was due to the
refusal of the Tius to pay the required transfer taxes to secure the approval of the SEC for the
property contribution and, thereafter, the issuance of title in FLADCs name. They also argued
that the liquidation of FLADC may not legally be ordered by the appellate court even for so
called practical considerations or even to prevent further squabbles and numerous litigations,
since the same are not valid grounds under the Corporation Code. Moreover, the Ongs bewailed
the failure of the CA to grant interest on their P70 million and P20 million advances to FLADC
and David S. Tiu, respectively, and to award costs and damages.

In their petition docketed as G.R. No. 144629, Tiu et al. vs. Ong et al., the Tius, on the other
hand, contended that the rescission should have been limited to the restitution of the parties
respective investments and not the liquidation of FLADC based on the erroneous perception by
the court that: the Masagana Citimall was threatened with incompletion since FLADC was in
financial distress; that the Tius invited the Ongs to invest in FLADC to settle its P190 million loan
from PNB; that they violated the Pre-Subscription Agreement when it was the Lichaucos and not
the Tius who executed the deed of assignment over the 151 square-meter property
commensurate to 49,800 shares in FLADC thereby failing to pay the price for the said shares;
that they did not turn over to the Ongs the entire amount of FLADC funds; that they were
diverting rentals from lease contracts due to FLADC to their own MATTERCO account; that the
P70 million paid by the Ongs was an advance and not a premium on capital; and that, by
rescinding the Pre-Subscription Agreement, they wanted to wrestle away the management of the
mall and prevent the Ongs from enjoying the profits of their P190 million investment in FLADC.

On February 1, 2002, this Court promulgated its Decision (the subject of the instant motions),
affirming the assailed decision of the Court of Appeals but with the following modifications:
1. the P20 million loan extended by the Ongs to the Tius shall earn interest at twelve percent
(12%) per annum to be computed from the time of judicial demand which is from April 23, 1996;

2. the P70 million advanced by the Ongs to the FLADC shall earn interest at ten percent (10%)
per annum to be computed from the date of the FLADC Board Resolution which is June 19,
1996; and

3. the Tius shall be credited with 49,800 shares in FLADC for their property contribution,
specifically, the 151 sq. m. parcel of land.

This Court affirmed the fact that both the Ongs and the Tius violated their respective obligations
under the Pre-Subscription Agreement. The Ongs prevented the Tius from assuming the
positions of Vice-President and Treasurer of the corporation. On the other hand, the Decision
established that the Tius failed to turn over FLADC funds to the Ongs and that the Tius diverted
rentals due to FLADC to their MATTERCO account. Consequently, it held that rescission was not
possible since both parties were in pari delicto. However, this Court agreed with the Court of
Appeals that the remedy of specific performance, as espoused by the Ongs, was not practical
and sound either and would only lead to further squabbles and numerous litigations between the
parties.

On March 15, 2002, the Tius filed before this Court a Motion for Issuance of a Writ of Execution
on the grounds that: (a) the SEC order had become executory as early as September 11, 1998
pursuant to Sections 1 and 12, Rule 43 of the Rules of Court; (b) any further delay would be
injurious to the rights of the Tius since the case had been pending for more than six years; and (c)
the SEC no longer had quasi-judicial jurisdiction under RA 8799 (Securities Regulation Code). The
Ongs filed their opposition, contending that the Decision dated February 1, 2002 was not yet
final and executory; that no good reason existed to issue a warrant of execution; and that,
pursuant to Section 5.2 of RA 8799, the SEC retained jurisdiction over pending cases involving
intra-corporate disputes already submitted for final resolution upon the effectivity of the said
law.

Aside from their opposition to the Tius Motion for Issuance of Writ of Execution, the Ongs filed
their own Motion for Reconsideration; Alternatively, Motion for Modification (of the February 1,
2002 Decision) on March 15, 2002, raising two main points: (a) that specific performance and not
rescission was the proper remedy under the premises; and (b) that, assuming rescission to be
proper, the subject decision of this Court should be modified to entitle movants to their
proportionate share in the mall.

On their first point (specific performance and not rescission was the proper remedy), movants
Ong argue that their alleged breach of the Pre-Subscription Agreement was, at most, casual
which did not justify the rescission of the contract. They stress that providing appropriate offices
for David S. Tiu and Cely Y. Tiu as Vice-President and Treasurer, respectively, had no bearing on
their obligations under the Pre-Subscription Agreement since the said obligation (to provide
executive offices) pertained to FLADC itself. Such obligation arose from the relations between
the said officers and the corporation and not any of the individual parties such as the Ongs.
Likewise, the alleged failure of the Ongs to credit shares of stock in favor of the Tius for their
property contributions also pertained to the corporation and not to the Ongs. Just the same, it
could not be done in view of the Tius refusal to pay the necessary transfer taxes which in turn
resulted in the inability to secure SEC approval for the property contributions and the issuance of
a new TCT in the name of FLADC.

Besides, according to the Ongs, the principal objective of both parties in entering into the Pre-
Subscription Agreement in 1994 was to raise the P190 million desperately needed for the
payment of FLADCs loan to PNB. Hence, in this light, the alleged failure to provide office space
for the two corporate officers was no more than an inconsequential infringement. For rescission
to be justified, the law requires that the breach of contract should be so substantial or
fundamental as to defeat the primary objective of the parties in making the agreement. At any
rate, the Ongs claim that it was the Tius who were guilty of fundamental violations in failing to
remit funds due to FLADC and diverting the same to their MATTERCO account.

The Ongs also allege that, in view of the findings of the Court that both parties were guilty of
violating the Pre-Subscription Agreement, neither of them could resort to rescission under the
principle of pari delicto. In addition, since the cash and other contributions now sought to be
returned already belong to FLADC, an innocent third party, said remedy may no longer be
availed of under the law.

On their second point (assuming rescission to be proper, the Ongs should be given their
proportionate share of the mall), movants Ong vehemently take exception to the second item in
the dispositive portion of the questioned Decision insofar as it decreed that whatever remains of
the assets of FLADC and the management thereof (after liquidation) shall be transferred to the
Tius. They point out that the mall itself, which would have been foreclosed by PNB if not for their
timely investment of P190 million in 1994 and which is now worth about P1 billion mainly because
of their efforts, should be included in any partition and distribution. They (the Ongs) should not
merely be given interest on their capital investments. The said portion of our Decision, according
to them, amounted to the unjust enrichment of the Tius and ran contrary to our own
pronouncement that the act of the Tius in unilaterally rescinding the agreement was the height of
ingratitude and an attempt to pull a fast one as it would prevent the Ongs from enjoying the
fruits of their P190 million investment in FLADC. It also contravenes this Courts assurance in the
questioned Decision that the Ongs and Tius will have a bountiful return of their respective
investments derived from the profits of the corporation.

Willie Ong filed a separate Motion for Partial Reconsideration dated March 8, 2002, pointing out
that there was no violation of the Pre-Subscription Agreement on the part of the Ongs; that,
after more than seven years since the mall began its operations, rescission had become not only
impractical but would also adversely affect the rights of innocent parties; and that it would be
highly inequitable and unfair to simply return the P100 million investment of the Ongs and give
the remaining assets now amounting to about P1 billion to the Tius.

The Tius, in their opposition to the Ongs motion for reconsideration, counter that the arguments
therein are a mere re-hash of the contentions in the Ongs petition for review and previous
motion for reconsideration of the Court of Appeals decision. The Tius compare the arguments in
said pleadings to prove that the Ongs do not raise new issues, and, based on well-settled
jurisprudence,[12] the Ongs present motion is therefore pro-forma and did not prevent the
Decision of this Court from attaining finality.

On January 29, 2003, the Special Second Division of this Court held oral arguments on the
respective positions of the parties. On February 27, 2003, Dr. Willie Ong and the rest of the
movants Ong filed their respective memoranda. On February 28, 2003, the Tius submitted their
memorandum.

We grant the Ongs motions for reconsideration.

This is not the first time that this Court has reversed itself on a motion for reconsideration. In
Philippine Consumers Foundation, Inc. vs. National Telecommunications Commission,[13] this
Court, through then Chief Justice Felix V. Makasiar, said that its members may and do change
their minds, after a re-study of the facts and the law, illuminated by a mutual exchange of
views.[14] After a thorough re-examination of the case, we find that our Decision of February 1,
2002 overlooked certain aspects which, if not corrected, will cause extreme and irreparable
damage and prejudice to the Ongs, FLADC and its creditors.

The procedural rule on pro-forma motions pointed out by the Tius should not be blindly applied
to meritorious motions for reconsideration. As long as the same adequately raises a valid
ground[15] (i.e., the decision or final order is contrary to law), this Court has to evaluate the
merits of the arguments to prevent an unjust decision from attaining finality. In Security Bank and
Trust Company vs. Cuenca,[16] we ruled that a motion for reconsideration is not pro-forma for
the reason alone that it reiterates the arguments earlier passed upon and rejected by the
appellate court. We explained there that a movant may raise the same arguments, if only to
convince this Court that its ruling was erroneous. Moreover, the rule (that a motion is pro-forma
if it only repeats the arguments in the previous pleadings) will not apply if said arguments were
not squarely passed upon and answered in the decision sought to be reconsidered. In the case at
bar, no ruling was made on some of the petitioner Ongs arguments. For instance, no clear ruling
was made on why an order distributing corporate assets and property to the stockholders would
not violate the statutory preconditions for corporate dissolution or decrease of authorized capital
stock. Thus, it would serve the ends of justice to entertain the subject motion for reconsideration
since some important issues therein, although mere repetitions, were not considered or clearly
resolved by this Court.

Going now to the merits, we resolve whether the Tius could legally rescind the Pre-Subscription
Agreement. We rule that they could not.

FLADC was originally incorporated with an authorized capital stock of 500,000 shares with the
Tius owning 450,200 shares representing the paid-up capital. When the Tius invited the Ongs to
invest in FLADC as stockholders, an increase of the authorized capital stock became necessary to
give each group equal (50-50) shareholdings as agreed upon in the Pre-Subscription Agreement.
The authorized capital stock was thus increased from 500,000 shares to 2,000,000 shares with a
par value of P100 each, with the Ongs subscribing to 1,000,000 shares and the Tius to 549,800
more shares in addition to their 450,200 shares to complete 1,000,000 shares. Thus, the subject
matter of the contract was the 1,000,000 unissued shares of FLADC stock allocated to the Ongs.
Since these were unissued shares, the parties Pre-Subscription Agreement was in fact a
subscription contract as defined under Section 60, Title VII of the Corporation Code:

Any contract for the acquisition of unissued stock in an existing corporation or a corporation still
to be formed shall be deemed a subscription within the meaning of this Title, notwithstanding
the fact that the parties refer to it as a purchase or some other contract (Italics supplied).

A subscription contract necessarily involves the corporation as one of the contracting parties
since the subject matter of the transaction is property owned by the corporation its shares of
stock. Thus, the subscription contract (denominated by the parties as a Pre-Subscription
Agreement) whereby the Ongs invested P100 million for 1,000,000 shares of stock was, from the
viewpoint of the law, one between the Ongs and FLADC, not between the Ongs and the Tius.
Otherwise stated, the Tius did not contract in their personal capacities with the Ongs since they
were not selling any of their own shares to them. It was FLADC that did.

Considering therefore that the real contracting parties to the subscription agreement were
FLADC and the Ongs alone, a civil case for rescission on the ground of breach of contract filed
by the Tius in their personal capacities will not prosper. Assuming it had valid reasons to do so,
only FLADC (and certainly not the Tius) had the legal personality to file suit rescinding the
subscription agreement with the Ongs inasmuch as it was the real party in interest therein.
Article 1311 of the Civil Code provides that contracts take effect only between the parties, their
assigns and heirs Therefore, a party who has not taken part in the transaction cannot sue or be
sued for performance or for cancellation thereof, unless he shows that he has a real interest
affected thereby. [17]

In their February 28, 2003 Memorandum, the Tius claim that there are two contracts embodied in
the Pre-Subscription Agreement: a shareholders agreement between the Tius and the Ongs
defining and governing their relationship and a subscription contract between the Tius, the Ongs
and FLADC regarding the subscription of the parties to the corporation. They point out that
these two component parts form one whole agreement and that their terms and conditions are
intrinsically related and dependent on each other. Thus, the breach of the shareholders
agreement, which was allegedly the consideration for the subscription contract, was also a
breach of the latter.

Aside from the fact that this is an entirely new angle never raised in any of their previous
pleadings until after the oral arguments on January 29, 2003, we find this argument too strained
for comfort. It is obviously intended to remedy and cover up the Tius lack of legal personality to
rescind an agreement in which they were personally not parties-in-interest. Assuming arguendo
that there were two sub-agreements embodied in the Pre-Subscription Agreement, this Court
fails to see how the shareholders agreement between the Ongs and Tius can, within the bounds
of reason, be interpreted as the consideration of the subscription contract between FLADC and
the Ongs. There was nothing in the Pre-Subscription Agreement even remotely suggesting such
alleged interdependence. Be that as it may, however, the Tius are nevertheless not the proper
parties to raise this point because they were not parties to the subscription contract between
FLADC and the Ongs. Thus, they are not in a position to claim that the shareholders agreement
between them and the Ongs was what induced FLADC and the Ongs to enter into the
subscription contract. It is the Ongs alone who can say that. Though FLADC was represented by
the Tius in the subscription contract, FLADC had a separate juridical personality from the Tius.
The case before us does not warrant piercing the veil of corporate fiction since there is no proof
that the corporation is being used as a cloak or cover for fraud or illegality, or to work
injustice.[18]

The Tius also argue that, since the Ongs represent FLADC as its management, breach by the
Ongs is breach by FLADC. This must also fail because such an argument disregards the separate
juridical personality of FLADC.

The Tius allege that they were prevented from participating in the management of the
corporation. There is evidence that the Ongs did prevent the rightfully elected Treasurer, Cely
Tiu, from exercising her function as such. The records show that the President, Wilson Ong,
supervised the collection and receipt of rentals in the Masagana Citimall;[19] that he ordered the
same to be deposited in the bank;[20] and that he held on to the cash and properties of the
corporation.[21] Section 25 of the Corporation Code prohibits the President from acting
concurrently as Treasurer of the corporation. The rationale behind the provision is to ensure the
effective monitoring of each officers separate functions.

However, although the Tius were adversely affected by the Ongs unwillingness to let them
assume their positions, rescission due to breach of contract is definitely the wrong remedy for
their personal grievances. The Corporation Code, SEC rules and even the Rules of Court provide
for appropriate and adequate intra-corporate remedies, other than rescission, in situations like
this. Rescission is certainly not one of them, specially if the party asking for it has no legal
personality to do so and the requirements of the law therefor have not been met. A contrary
doctrine will tread on extremely dangerous ground because it will allow just any stockholder, for
just about any real or imagined offense, to demand rescission of his subscription and call for the
distribution of some part of the corporate assets to him without complying with the requirements
of the Corporation Code.

Hence, the Tius, in their personal capacities, cannot seek the ultimate and extraordinary remedy
of rescission of the subject agreement based on a less than substantial breach of subscription
contract. Not only are they not parties to the subscription contract between the Ongs and
FLADC; they also have other available and effective remedies under the law.

All this notwithstanding, granting but not conceding that the Tius possess the legal standing to
sue for rescission based on breach of contract, said action will nevertheless still not prosper since
rescission will violate the Trust Fund Doctrine and the procedures for the valid distribution of
assets and property under the Corporation Code.

The Trust Fund Doctrine, first enunciated by this Court in the 1923 case of Philippine Trust Co.
vs. Rivera,[22] provides that subscriptions to the capital stock of a corporation constitute a fund
to which the creditors have a right to look for the satisfaction of their claims.[23] This doctrine is
the underlying principle in the procedure for the distribution of capital assets, embodied in the
Corporation Code, which allows the distribution of corporate capital only in three instances: (1)
amendment of the Articles of Incorporation to reduce the authorized capital stock,[24] (2)
purchase of redeemable shares by the corporation, regardless of the existence of unrestricted
retained earnings,[25] and (3) dissolution and eventual liquidation of the corporation.
Furthermore, the doctrine is articulated in Section 41 on the power of a corporation to acquire its
own shares[26] and in Section 122 on the prohibition against the distribution of corporate assets
and property unless the stringent requirements therefor are complied with.[27]

The distribution of corporate assets and property cannot be made to depend on the whims and
caprices of the stockholders, officers or directors of the corporation, or even, for that matter, on
the earnest desire of the court a quo to prevent further squabbles and future litigations unless
the indispensable conditions and procedures for the protection of corporate creditors are
followed. Otherwise, the corporate peace laudably hoped for by the court will remain nothing
but a dream because this time, it will be the creditors turn to engage in squabbles and litigations
should the court order an unlawful distribution in blatant disregard of the Trust Fund Doctrine.

In the instant case, the rescission of the Pre-Subscription Agreement will effectively result in the
unauthorized distribution of the capital assets and property of the corporation, thereby violating
the Trust Fund Doctrine and the Corporation Code, since rescission of a subscription agreement
is not one of the instances when distribution of capital assets and property of the corporation is
allowed.

Contrary to the Tius allegation, rescission will, in the final analysis, result in the premature
liquidation of the corporation without the benefit of prior dissolution in accordance with Sections
117, 118, 119 and 120 of the Corporation Code.[28] The Tius maintain that rescinding the
subscription contract is not synonymous to corporate liquidation because all rescission will entail
would be the simple restoration of the status quo ante and a return to the two groups of their
cash and property contributions. We wish it were that simple. Very noticeable is the fact that the
Tius do not explain why rescission in the instant case will not effectively result in liquidation. The
Tius merely refer in cavalier fashion to the end-result of rescission (which incidentally is 100%
favorable to them) but turn a blind eye to its unfair, inequitable and disastrous effect on the
corporation, its creditors and the Ongs.

In their Memorandum dated February 28, 2003, the Tius claim that rescission of the agreement
will not result in an unauthorized liquidation of the corporation because their case is actually a
petition to decrease capital stock pursuant to Section 38 of the Corporation Code. Section 122
of the law provides that (e)xcept by decrease of capital stock, no corporation shall distribute any
of its assets or property except upon lawful dissolution and after payment of all its debts and
liabilities. The Tius claim that their case for rescission, being a petition to decrease capital stock,
does not violate the liquidation procedures under our laws. All that needs to be done, according
to them, is for this Court to order (1) FLADC to file with the SEC a petition to issue a certificate
of decrease of capital stock and (2) the SEC to approve said decrease. This new argument has no
merit.

The Tius case for rescission cannot validly be deemed a petition to decrease capital stock
because such action never complied with the formal requirements for decrease of capital stock
under Section 33 of the Corporation Code. No majority vote of the board of directors was ever
taken. Neither was there any stockholders meeting at which the approval of stockholders owning
at least two-thirds of the outstanding capital stock was secured. There was no revised treasurers
affidavit and no proof that said decrease will not prejudice the creditors rights. On the contrary,
all their pleadings contained were alleged acts of violations by the Ongs to justify an order of
rescission.

Furthermore, it is an improper judicial intrusion into the internal affairs of the corporation to
compel FLADC to file at the SEC a petition for the issuance of a certificate of decrease of stock.
Decreasing a corporations authorized capital stock is an amendment of the Articles of
Incorporation. It is a decision that only the stockholders and the directors can make, considering
that they are the contracting parties thereto. In this case, the Tius are actually not just asking for
a review of the legality and fairness of a corporate decision. They want this Court to make a
corporate decision for FLADC. We decline to intervene and order corporate structural changes
not voluntarily agreed upon by its stockholders and directors.

Truth to tell, a judicial order to decrease capital stock without the assent of FLADCs directors
and stockholders is a violation of the business judgment rule which states that:

xxx xxx xxx (C)ontracts intra vires entered into by the board of directors are binding upon the
corporation and courts will not interfere unless such contracts are so unconscionable and
oppressive as to amount to wanton destruction to the rights of the minority, as when plaintiffs
aver that the defendants (members of the board), have concluded a transaction among
themselves as will result in serious injury to the plaintiffs stockholders.[29]

The reason behind the rule is aptly explained by Dean Cesar L. Villanueva, an esteemed author in
corporate law, thus:

Courts and other tribunals are wont to override the business judgment of the board mainly
because, courts are not in the business of business, and the laissez faire rule or the free
enterprise system prevailing in our social and economic set-up dictates that it is better for the
State and its organs to leave business to the businessmen; especially so, when courts are ill-
equipped to make business decisions. More importantly, the social contract in the corporate
family to decide the course of the corporate business has been vested in the board and not with
courts.[30]

Apparently, the Tius do not realize the illegal consequences of seeking rescission and control of
the corporation to the exclusion of the Ongs. Such an act infringes on the law on reduction of
capital stock. Ordering the return and distribution of the Ongs capital contribution without
dissolving the corporation or decreasing its authorized capital stock is not only against the law
but is also prejudicial to corporate creditors who enjoy absolute priority of payment over and
above any individual stockholder thereof.

Stripped to its barest essentials, the issue of rescission in this case is not difficult to understand.
If rescission is denied, will injustice be inflicted on any of the parties? The answer is no because
the financial interests of both the Tius and the Ongs will remain intact and safe within FLADC. On
the other hand, if rescission is granted, will any of the parties suffer an injustice? Definitely yes
because the Ongs will find themselves out in the streets with nothing but the money they had in
1994 while the Tius will not only enjoy a windfall estimated to be anywhere from P450 million to
P900 million[31] but will also take over an extremely profitable business without much effort at
all.
Another very important point follows. The Court of Appeals and, later on, our Decision dated
February 1, 2002, stated that both groups were in pari delicto, meaning, that both the Tius and
the Ongs committed breaches of the Pre-Subscription Agreement. This may be true to a certain
extent but, judging from the comparative gravity of the acts separately committed by each
group, we find that the Ongs acts were relatively tame vis--vis those committed by the Tius in not
surrendering FLADC funds to the corporation and diverting corporate income to their own
MATTERCO account. The Ongs were right in not issuing to the Tius the shares corresponding to
the four-story building and the 1,902.30 square-meter lot because no title for it could be issued
in FLADCs name, owing to the Tius refusal to pay the transfer taxes. And as far as the 151
square-meter lot was concerned, why should FLADC issue additional shares to the Tius for
property already owned by the corporation and which, in the final analysis, was already factored
into the shareholdings of the Tius before the Ongs came in?

We are appalled by the attempt by the Tius, in the words of the Court of Appeals, to pull a fast
one on the Ongs because that was where the problem precisely started. It is clear that, when the
finances of FLADC improved considerably after the equity infusion of the Ongs, the Tius started
planning to take over the corporation again and exclude the Ongs from it. It appears that the
Tius refusal to pay transfer taxes might not have really been at all unintentional because, by
failing to pay that relatively small amount which they could easily afford, the Tius should have
expected that they were not going to be given the corresponding shares. It was, from every
angle, the perfect excuse for blackballing the Ongs. In other words, the Tius created a problem
then used that same problem as their pretext for showing their partners the door. In the process,
they stood to be rewarded with a bonanza of anywhere between P450 million to P900 million in
assets (from an investment of only P45 million which was nearly foreclosed by PNB), to the
extreme and irreparable damage of the Ongs, FLADC and its creditors.

After all is said and done, no one can close his eyes to the fact that the Masagana Citimall would
not be what it has become today were it not for the timely infusion of P190 million by the Ongs
in 1994. There are no ifs or buts about it.

Without the Ongs, the Tius would have lost everything they originally invested in said mall. If only
for this and the fact that this Resolution can truly pave the way for both groups to enjoy the fruits
of their investments assuming good faith and honest intentions we cannot allow the rescission of
the subject subscription agreement. The Ongs shortcomings were far from serious and certainly
less than substantial; they were in fact remediable and correctable under the law. It would be
totally against all rules of justice, fairness and equity to deprive the Ongs of their interests on
petty and tenuous grounds.

WHEREFORE, the motion for reconsideration, dated March 15, 2002, of petitioners Ong Yong,
Juanita Tan Ong, Wilson Ong, Anna Ong, William Ong, Willie Ong and Julie Ong Alonzo and the
motion for partial reconsideration, dated March 15, 2002, of petitioner Willie Ong are hereby
GRANTED. The Petition for Confirmation of the Rescission of the Pre-Subscription Agreement
docketed as SEC Case No. 02-96-5269 is hereby DISMISSED for lack of merit. The unilateral
rescission by the Tius of the subject Pre-Subscription Agreement, dated August 15, 1994, is
hereby declared as null and void.
The motion for the issuance of a writ of execution, dated March 15, 2002, of petitioners David S.
Tiu, Cely Y. Tiu, Moly Yu Gow, Belen See Yu, D. Terence Y. Tiu, John Yu and Lourdes C. Tiu is
hereby DENIED for being moot.

Accordingly, the Decision of this Court, dated February 1, 2002, affirming with modification the
decision of the Court of Appeals, dated October 5, 1999, and the SEC en banc, dated
September 11, 1998, is hereby REVERSED.

Costs against the petitioner Tius.

SO ORDERED.